Document:

EXHIBIT 10.7

                           NOTE MODIFICATION AGREEMENT

         THIS NOTE MODIFICATION AGREEMENT (the "Agreement") is made as of this
14th day of February, 2001, by and among AVIATION SALES DISTRIBUTION SERVICES
COMPANY, a Delaware corporation ("Distribution"), AEROCELL STRUCTURES, INC., an
Arkansas corporation ("Aerocell"), AVS/M-2, INC., a Delaware corporation
(formerly known as AVS/Kratz-Wilde Machine Company ("Kratz-Wilde"), WHITEHALL
CORPORATION, a Delaware corporation ("Whitehall"), TRIAD INTERNATIONAL
MAINTENANCE CORPORATION, a Delaware corporation ("TIMCO"), AVS/M-3, INC., an
Arizona corporation (formerly known as Apex Manufacturing, Inc.) ("Apex"),
CARIBE AVIATION, INC., a Florida corporation ("Caribe"), AIRCRAFT INTERIOR
DESIGN, INC., a Florida corporation ("Design"), AVIATION SALES LEASING COMPANY,
a Delaware corporation ("Leasing"), TIMCO ENGINE CENTER, INC., a Delaware
corporation ("TIMCO Engine"), (each also known individually as a "Borrower" and
collectively as the "Borrowers"), and CITICORP USA, INC., a Delaware corporation
("CUSA").

                              PRELIMINARY STATEMENT

         A. The Borrowers are joint and several obligors on that certain Amended
and Restated Term Loan Note, dated May 31, 2000, (the "Supplemental Term Loan
Note"), executed by the Borrowers and made payable to the order of CUSA.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Supplemental Term Loan Note.

         B. The Borrowers have agreed to modify the Supplemental Term Loan Note
to delete the Maturity Date stated therein and substitute an amortization
schedule therefor.

         NOW, THEREFORE, in consideration of the foregoing premises and the
terms and conditions herein, the parties hereto agree as follows:

         1. The Maturity Date set forth in the Supplemental Term Loan Note shall
be deleted and each of the Borrowers hereby expressly jointly and severally
promises to pay the principal amount of the indebtedness evidenced by the
Supplemental Term Loan Note in thirteen (13) equal monthly installments in the
amount of Five Hundred Thousand Dollars and No Cents ($500,000.00) each
commencing on June 14, 2001 and continuing on the 14th day of each calendar
month thereafter through June 14, 2002 and one (1) final installment in the
amount of Nine Million Dollars and No Cents ($9,000,000.00) on July 31, 2002.
Notwithstanding the foregoing, in the event the Borrowers are prohibited from
making any principal installment as and when set forth above as a result of the
provisions of Section 10.19 of the Credit Agreement, the Borrowers (a) shall
make such portion of the applicable installment payment, if any, which would be
permitted under the terms of such Section 10.19 on the due date therefor and (b)
the amount of the immediately succeeding installment shall be increased by the
portion of such applicable installment which is not paid when due under the
stated amortization scheduled set forth above.

Note Modification Agreement

<PAGE>

         2. It is expressly understood and agreed by the parties hereto that
this Agreement merely modifies the payment date for the principal amount of the
indebtedness evidenced by the Supplemental Term Loan Note as set forth therein,
is not payment for Supplemental Term Loan Note, and is in no way to constitute a
novation of the Supplemental Term Loan Note. Except as expressly provided
herein, all terms and provisions of the Supplemental Term Loan Note shall remain
and continue in full force and effect.

         3. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

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

         IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto on the date and year first above written.

AVIATION SALES DISTRIBUTION                 AEROCELL STRUCTURES, INC.
SERVICES COMPANY

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

AVS/M-2, INC.                               WHITEHALL CORPORATION

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

TRIAD INTERNATIONAL MAINTENANCE             AVS/M-3, INC.
CORPORATION

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

Note Modification Agreement                                     Signature Page 1

<PAGE>

AIRCRAFT INTERIOR DESIGN, INC.              CARIBE AVIATION, INC.

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

TIMCO ENGINE CENTER, INC.                   AVIATION SALES LEASING COMPANY

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

Acknowledged as of the 14th
day of February, 2001

CITICORP USA, INC.

By: /s/
   ------------------------------
Name:
     ----------------------------
Title:
      ---------------------------

Note Modification Agreement                                     Signature Page 2

<PAGE>

The terms and conditions of the aforesaid Note Modification Agreement are hereby
acknowledged and accepted by each of the undersigned guarantors of the payment
and performance of the Supplemental Term Loan Note and each such guarantor
hereby reaffirms its guarantee of payment and performance of the aforesaid
Supplemental Term Loan Note and represents and warrants that no consents,
approvals or waivers with respect to the agreements set forth above, which have
not been obtained, are required under the terms of the undersigneds' respective
material contractual obligations.

AVS/M-1, INC.                               AVIATION SALES PROPERTY
                                            MANAGEMENT CORP.

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

AVIATION SALES FINANCE COMPANY              AERO HUSHKIT CORPORATION

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

TIMCO ENGINEERED SYSTEMS, INC.              HYDROSCIENCE, INC.

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

AVIATION SALES MAINTENANCE, REPAIR          AVIATION SALES SPS I, INC.
& OVERHAUL COMPANY

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

Note Modification Agreement                                     Signature Page 3

<PAGE>

AVIATION SALES COMPANY                      AVSRE, L.P.
                                            by Aviation Sales Property
                                              Management Corp., as
                                              General Partner

By: /s/                                     By: /s/
   ------------------------------              ------------------------------
Name:                                       Name:
     ----------------------------                ----------------------------
Title:                                      Title:
      ---------------------------                 ---------------------------

Note Modification Agreement                                     Signature Page 4COMMON STOCK PURCHASE AGREEMENT

     This COMMON STOCK  PURCHASE  AGREEMENT  (this  "Agreement")  is dated as of
January  24,  2001  by and  between  L.A.M.  Pharmaceutical  Corp.,  a  Delaware
corporation (the "Company"), and Hockbury Limited (the "Purchaser").

            WHEREAS,  the parties desire that, upon the terms and subject to the
conditions  contained herein, the Company shall issue and sell to Purchaser from
time to time as provided herein, and Purchaser shall purchase, up to $20,000,000
of Common Stock (as defined below) and Warrants (as defined below); and

            WHEREAS, such investments will be made by the Purchaser as statutory
underwriter of a registered  indirect  primary  offering of such Common Stock by
the Company.

            NOW, THEREFORE,  in consideration of the foregoing premises, and the
promises and covenants  herein  contained,  the receipt and sufficiency of which
are hereby  acknowledged  by the parties  hereto,  the parties,  intending to be
legally bound, hereby agree as follows:

                                   Article 1
                        PURCHASE AND SALE OF COMMON STOCK

     Section  1.1.  Purchase  and  Sale  of  Stock.  Subject  to the  terms  and
conditions  of this  Agreement,  the Company may sell and issue to the Purchaser
and the  Purchaser  shall be  obligated to purchase  from the Company,  up to an
aggregate  of,  $20,000,000  of the Common  Stock and the Warrant  based on Draw
Downs of up to $1,000,000, subject to the terms herein.

     Section 1.2.  Purchase  Price and Initial  Closing.  The Company  agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations,  warranties,  covenants,  terms and conditions of this
Agreement,  the  Purchaser  agrees to  purchase  that number of the Shares to be
issued in  connection  with each Draw Down.  The delivery of executed  documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article I of the Escrow Agreement,  attached as Exhibit
B hereto,  (the  "Initial  Closing")  shall take place at the offices of Epstein
Becker & Green,  P.C.,  250 Park  Avenue,  New York,  New York  10177 (i) within
fifteen (15) days from the date hereof,  or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Initial  Closing
Date").  Each party  shall  deliver  all  documents,  instruments  and  writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.

                                   Article 2
                         REPRESENTATIONS AND WARRANTIES

     Section 2.1.  Representation  and  Warranties  of the Company.  The Company
hereby makes the following representations and warranties to the Purchaser:

<PAGE>

(a)  Organization,  Good Standing and Power.  The Company is a corporation  duly
     incorporated  validly  existing and in good standing  under the laws of the
     State of Delaware and has all requisite  corporate  authority to own, lease
     and operate its  properties  and assets and to carry on its business as now
     being  conducted.  The Company does not have any  subsidiaries and does not
     own more than fifty percent (50%) of or control any other  business  entity
     except as set forth in the SEC Documents.  The Company is duly qualified to
     do  business  and is in good  standing  as a foreign  corporation  in every
     jurisdiction  in which the nature of the  business  conducted  or  property
     owned by it makes such qualification  necessary,  other than those in which
     the failure so to qualify would not have a Material Adverse Effect.

(b)  Authorization,  Enforcement.  (i) The Company has the  requisite  corporate
     power and  corporate  authority  to enter into and perform its  obligations
     under the Transaction  Documents and to issue the Draw Down Shares pursuant
     to  their  respective  terms,  (ii)  the  execution  and  delivery  of  the
     Transaction  Documents  by the  Company and the  consummation  by it of the
     transactions  contemplated  hereby and thereby have been duly authorized by
     all necessary  corporate  action and no further consent or authorization of
     the Company or its Board of Directors  or  stockholders  is  required,  and
     (iii) the  Transaction  Documents  have been duly executed and delivered by
     the Company and at the Initial Closing shall  constitute  valid and binding
     obligations  of the Company  enforceable  against the Company in accordance
     with  their  terms,  except  as  such  enforceability  may  be  limited  by
     applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
     conservatorship,  receivership  or similar  laws  relating to, or affecting
     generally the  enforcement of,  creditors'  rights and remedies or by other
     equitable  principles  of general  application.  The  Company  has duly and
     validly  authorized  and  reserved  for  issuance  shares of  Common  Stock
     sufficient in number for the issuance of the Draw Down Shares.

(c)  Capitalization.  The  authorized  capital stock of the Company  consists of
     50,000,000 shares of Common Stock of which 14,081,930 shares are issued and
     outstanding and no preferred  stock.  All of the outstanding  shares of the
     Company's Common Stock have been duly and validly  authorized and are fully
     paid and non-assessable,  except as set forth in the SEC Documents.  Except
     as set forth in this Agreement and the Registration Rights Agreement and as
     set forth in the SEC Documents,  or on Schedule 2.1(c) hereto, no shares of
     Common Stock are entitled to preemptive  rights or registration  rights and
     there are no outstanding options,  warrant,  scrip, rights to subscribe to,
     calls or commitments of any character whatsoever relating to, or securities
     or rights  convertible  into,  any shares of capital  stock of the Company.
     Furthermore,  except as set forth in this Agreement and as set forth in the
     SEC Documents or on Schedule 2.1(c),  there are no contracts,  commitments,
     understandings, or arrangements by which the Company is or may become bound
     to issue additional  shares of the capital stock of the Company or options,
     securities  or  rights  convertible  into  shares of  capital  stock of the
     Company. Except as set forth on Schedule 2.1(c), the Company is not a party
     to any agreement granting registration rights to any person with respect to
     any of its  equity or debt  securities.  Except  as set  forth on  Schedule
     2.1(c),  the  Company  is not a party to, and it has no  knowledge  of, any
     agreement  restricting  the voting or transfer of any shares of the capital
     stock  of the  Company.  Except  as set  forth in the SEC  Documents  or on
     Schedule  2.1(c)  hereto,   the  offer  and  sale  of  all  capital  stock,

<PAGE>

     convertible securities,  rights, warrants, or options of the Company issued
     prior to the Initial Closing complied with all applicable federal and state
     securities  laws, and no  stockholder  has a right of rescission or damages
     with  respect  thereto  which would have a Material  Adverse  Effect on the
     Company's  financial  condition or operating results.  The Company has made
     available  to the  Purchaser  true  and  correct  copies  of the  Company's
     articles or  certificate of  incorporation  as in effect on the date hereof
     (the  "Charter"),  and the Company's bylaws as in effect on the date hereof
     (the "Bylaws").  The Company has not received any notice from the Principal
     Market  questioning  or threatening  the continued  inclusion of the Common
     Stock on such market.

(d)   Issuance of Shares. The Shares to be issued under this Agreement have been
      duly authorized by all necessary  corporate  action and, when paid for and
      issued in  accordance  with the terms hereof and the  Warrant,  the Shares
      shall be validly issued and  outstanding,  fully paid and  non-assessable,
      and the Purchaser  shall be entitled to all rights accorded to a holder of
      Common Stock.

(e)  No  Conflicts.  Except  as set forth on  Schedule  2.1(e),  the  execution,
     delivery  and  performance  of  this  Agreement  by  the  Company  and  the
     consummation by the Company of the transactions  contemplated herein do not
     and will not (i) violate any provision of the Company's  Charter or Bylaws,
     (ii) conflict  with, or constitute a default (or an event which with notice
     or lapse of time or both would become a default)  under,  or give to others
     any rights of termination,  amendment, acceleration or cancellation of, any
     agreement,  mortgage, deed of trust, indenture,  note, bond, license, lease
     agreement,  instrument or obligation to which the Company is a party, (iii)
     create  or impose a lien,  charge or  encumbrance  on any  property  of the
     Company  under any  agreement or any  commitment  to which the Company is a
     party or by which the  Company  is bound or by which any of its  respective
     properties  or assets  are  bound,  or (iv)  result in a  violation  of any
     federal,  state, local or other foreign statute, rule,  regulation,  order,
     judgment  or decree  (including  any federal or state  securities  laws and
     regulations)  applicable  to the Company or any of its  subsidiaries  or by
     which any property or asset of the Company or any of its  subsidiaries  are
     bound or affected,  except,  in all cases,  for such  conflicts,  defaults,
     termination,  amendments,  accelerations,  cancellations  and violations as
     would  not,  individually  or in the  aggregate,  have a  Material  Adverse
     Effect.  The  business  of the Company  and its  subsidiaries  is not being
     conducted  in  violation  of any laws,  ordinances  or  regulations  of any
     governmental entity,  except for possible violations which singularly or in
     the  aggregate  do not and will not have a  Material  Adverse  Effect.  The
     Company is not  required  under any  federal,  state or local law,  rule or
     regulation  to obtain any consent,  authorization  or order of, or make any
     filing or registration with, any court or governmental  agency in order for
     it to  execute,  deliver  or  perform  any of its  obligations  under  this
     Agreement, or issue and sell the Shares in accordance with the terms hereof
     (other  than any  filings  which may be  required to be made by the Company
     with the SEC or state securities  administrators  subsequent to the Initial
     Closing and any registration statement which may be filed pursuant hereto);
     provided that, for purpose of the representation made in this sentence, the
     Company  is  assuming  and  relying  upon  the  accuracy  of  the  relevant
     representations and agreements of the Purchaser herein.

(f)  SEC  Documents,  Financial  Statements.  The Common Stock of the Company is
     registered  pursuant to Section 12(g) of the Exchange  Act, and,  except as

<PAGE>

     disclosed in the SEC Documents or on Schedule  2.1(f)  hereto,  the Company
     has  timely  filed all  reports,  schedules,  forms,  statements  and other
     documents required to be filed by it with the SEC pursuant to the reporting
     requirements  of the Exchange Act,  including  material  filed  pursuant to
     Section 13(a) or 15(d) of the Exchange Act (all of the foregoing  including
     filings  incorporated by reference  therein being referred to herein as the
     "SEC  Documents").  The  Company has  delivered  or made  available  to the
     Purchaser,  through the EDGAR system or otherwise, true and complete copies
     of the SEC  Documents  filed  with the SEC since  December  31,  1998.  The
     Company has not provided to the Purchaser any information which,  according
     to applicable law, rule or regulation,  should have been disclosed publicly
     by the Company but which has not been so disclosed, other than with respect
     to the transactions  contemplated by this Agreement. As of their respective
     filing dates, the SEC Documents  complied in all material respects with the
     requirements of the Exchange Act or the Securities Act, as applicable,  and
     the rules and regulations of the SEC promulgated  thereunder  applicable to
     such documents,  and, as of their respective  filing dates, none of the SEC
     Documents  contained any untrue  statement of a material fact or omitted to
     state a material fact  required to be stated  therein or necessary in order
     to make the statements  therein,  in light of the circumstances under which
     they were made,  not  misleading.  The financial  statements of the Company
     included in the SEC  Documents  comply as to form in all material  respects
     with applicable accounting  requirements under GAAP and the published rules
     and regulations of the SEC or other  applicable  rules and regulations with
     respect thereto. Such financial statements have been prepared in accordance
     with GAAP applied on a consistent basis during the periods involved (except
     (i) as may be otherwise indicated in such financial statements or the notes
     thereto or (ii) in the case of unaudited interim statements,  to the extent
     they may not include footnotes or may be condensed or summary  statements),
     and fairly present in all material  respects the financial  position of the
     Company  and its  subsidiaries  as of the dates  thereof and the results of
     operations and cash flows for the periods then ended (subject,  in the case
     of unaudited statements, to normal year-end audit adjustments).

(g)  Subsidiaries.  The SEC Documents or Schedule  2.1(g) hereto sets forth each
     subsidiary of the Company, showing the jurisdiction of its incorporation or
     organization  and showing the percentage of the Company's  ownership of the
     outstanding  stock or other interests of such subsidiary.  For the purposes
     of this Agreement,  "subsidiary" shall mean any corporation or other entity
     of which at least a majority of the securities or other ownership interests
     having ordinary voting power  (absolutely or contingently) for the election
     of directors or other persons  performing similar functions are at the time
     owned  directly  or  indirectly  by the  Company  and/or  any of its  other
     subsidiaries.  All of the issued and outstanding shares of capital stock of
     each subsidiary have been duly authorized and validly issued, and are fully
     paid and non-assessable. There are no outstanding preemptive, conversion or
     other  rights,  options,  warrants  or  agreements  granted or issued by or
     binding upon any  subsidiary  for the purchase or acquisition of any shares
     of capital  stock of any  subsidiary  or any other  securities  convertible
     into, exchangeable for or evidencing the rights to subscribe for any shares
     of such capital stock. Neither the Company nor any subsidiary is subject to
     any obligation (contingent or otherwise) to repurchase or otherwise acquire
     or  retire  any  shares  of the  capital  stock  of any  subsidiary  or any
     convertible  securities,  rights, warrants or options of the type described
     in the  preceding  sentence.  Neither the Company nor any  subsidiary  is a

<PAGE>

     party to, nor has any knowledge of, any agreement restricting the voting or
     transfer of any shares of the capital stock of any subsidiary.

(h)   No Material  Adverse  Effect.  Since the date of the  financial  statement
      contained  in the most  recently  filed Form 10-Q (or 10-QSB) or Form 10-K
      (or 10-KSB),  whichever is most current,  no Material  Adverse  Effect has
      occurred or exists with respect to the Company, except as disclosed in the
      SEC Documents or on Schedule 2.1(h) hereto.

(i)  No Undisclosed Liabilities.  Except as disclosed in the SEC Documents or on
     Schedule 2.1(i) hereto, neither the Company nor any of its subsidiaries has
     any  liabilities,  obligations,  claims or losses  (whether  liquidated  or
     unliquidated,  secured  or  unsecured,  absolute,  accrued,  contingent  or
     otherwise) that would be required to be disclosed on a balance sheet of the
     Company or any subsidiary  (including the notes thereto) in conformity with
     GAAP  which  are not  disclosed  in the SEC  Documents,  other  than  those
     incurred  in the  ordinary  course of the  Company's  or its  subsidiaries'
     respective  businesses  since such date and which,  individually  or in the
     aggregate,  do not or  would  not have a  Material  Adverse  Effect  on the
     Company or its subsidiaries.

(j)  No  Undisclosed  Events or  Circumstances.  Since the date of the financial
     statement  contained in the most  recently  filed Form 10- Q (or 10-QSB) or
     Form 10-K (or 10-KSB),  whichever is most current, no event or circumstance
     has  occurred  or exists  with  respect to the  Company or its  businesses,
     properties,  prospects,  operations  or financial  condition,  that,  under
     applicable  law,  rule  or  regulation,   requires  public   disclosure  or
     announcement prior to the date hereof by the Company but which has not been
     so publicly announced or disclosed in the SEC Documents.

(k)  Indebtedness.  The SEC Documents or Schedule 2.1(k) hereto sets forth as of
     the date hereof all outstanding  secured and unsecured  Indebtedness of the
     Company or any  subsidiary,  or for which the Company or any subsidiary has
     commitments. For the purposes of this Agreement,  "Indebtedness" shall mean
     (A) any  liabilities  for  borrowed  money or  amounts  owed in  excess  of
     $250,000 (other than trade accounts payable incurred in the ordinary course
     of business),  (B) all guaranties,  endorsements and contingent obligations
     in respect of Indebtedness of others, whether or not the same are or should
     be reflected in the Company's balance sheet (or the notes thereto),  except
     guaranties  by  endorsement  of  negotiable   instruments  for  deposit  or
     collection or similar transactions in the ordinary course of business;  and
     (C) the present value of any lease payments in excess of $250,000 due under
     leases  required to be  capitalized  in accordance  with GAAP.  Neither the
     Company nor any subsidiary is in default with respect to any Indebtedness.

(l)   Title to Assets.  Each of the  Company and the  subsidiaries  has good and
      marketable title to all of its real and personal property reflected in the
      SEC Documents,  free of any mortgages,  pledges,  charges, liens, security
      interests  or other  encumbrances,  except for those  indicated in the SEC
      Documents  or on  Schedule  2.1(1)  hereto  or such  that  do not  cause a
      Material  Adverse  Effect.  All said leases of the Company and each of its
      subsidiaries are valid and subsisting and in full force and effect.

<PAGE>

(m)  Actions  Pending.  There  is  no  action,  suit,  claim,  investigation  or
     proceeding pending or, to the knowledge of the Company,  threatened against
     the  Company  or any  subsidiary  which  questions  the  validity  of  this
     Agreement or the transactions contemplated hereby or any action taken or to
     be  taken  pursuant  hereto  or  thereto.  Except  as set  forth in the SEC
     Documents or on Schedule 2.1(m) hereto,  there is no action,  suit,  claim,
     investigation  or  proceeding  pending or, to the knowledge of the Company,
     threatened,  against or involving  the Company,  any  subsidiary  or any of
     their  respective  properties or assets.  There are no outstanding  orders,
     judgments,  injunctions,  awards or  decrees of any  court,  arbitrator  or
     governmental or regulatory body against the Company or any subsidiary.

(n)   Compliance  with Law.  The Company and each of its  subsidiaries  have all
      franchises,   permits,  licenses,   consents  and  other  governmental  or
      regulatory authorizations and approvals necessary for the conduct of their
      respective businesses as now being conducted by them unless the failure to
      possess   such   franchises,   permits,   licenses,   consents  and  other
      governmental or regulatory  authorizations and approvals,  individually or
      in the  aggregate,  could not  reasonably  be  expected to have a Material
      Adverse Effect.

(o)  Taxes.  The Company and each  subsidiary has filed all Tax Returns which it
     is required to file under  applicable  laws;  all such Tax Returns are true
     and accurate and have been prepared in compliance with all applicable laws;
     the  Company  has  paid all  Taxes  due and  owing by it or any  subsidiary
     (whether  or not such Taxes are  required  to be shown on a Tax Return) and
     has withheld and paid over to the appropriate  taxing authorities all Taxes
     which  it is  required  to  withhold  from  amounts  paid or  owing  to any
     employee, stockholder,  creditor or other third parties; and since December
     31, 1999, the charges,  accruals and reserves for Taxes with respect to the
     Company  (including any provisions for deferred income taxes)  reflected on
     the books of the Company are adequate to cover any Tax  liabilities  of the
     Company if its current tax year were treated as ending on the date hereof.

                  No claim has been made by a taxing authority in a jurisdiction
      where  the  Company  does not file tax  returns  that the  Company  or any
      subsidiary  is or may be subject to taxation by that  jurisdiction.  There
      are no foreign,  federal,  state or local tax audits or  administrative or
      judicial  proceedings  pending  or being  conducted  with  respect  to the
      Company or any subsidiary;  no information related to Tax matters has been
      requested by any foreign,  federal, state or local taxing authority;  and,
      except as disclosed above, no written notice  indicating an intent to open
      an  audit  or  other  review  has  been  received  by the  Company  or any
      subsidiary  from any foreign,  federal,  state or local taxing  authority.
      There  are no  material  unresolved  questions  or claims  concerning  the
      Company's Tax liability.  The Company (A) has not executed or entered into
      a closing  agreement  pursuant to ss. 7121 of the Internal Revenue Code or
      any predecessor provision thereof or any similar provision of state, local
      or  foreign  law;  and (B) has not  agreed to or is  required  to make any
      adjustments  pursuant to ss. 481 (a) of the  Internal  Revenue Code or any
      similar provision of state,  local or foreign law by reason of a change in
      accounting  method  initiated by the Company or any of its subsidiaries or
      has any knowledge that the IRS has proposed any such  adjustment or change
      in  accounting  method,  or has any  application  pending  with any taxing
      authority requesting permission for any changes in accounting methods that

<PAGE>

      relate to the business or operations  of the Company.  The Company has not
      been a United States real property holding  corporation within the meaning
      of ss. 897(c)(2) of the Internal Revenue Code during the applicable period
      specified in ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.

                  The Company has not made an election  under ss.  341(f) of the
      Internal  Revenue Code. The Company is not liable for the Taxes of another
      person that is not a subsidiary of the Company  under (A) Treas.  Reg. ss.
      1.1502-6 (or comparable provisions of state, local or foreign law), (B) as
      a transferee or successor,  (C) by contract or indemnity or (D) otherwise.
      The Company is not a party to any tax sharing  agreement.  The Company has
      not made any payments, is not obligated to make payments nor is it a party
      to an agreement that could obligate it to make any payments that would not
      be deductible under ss. 280G of the Internal Revenue Code.

                  For purposes of this Section 2.1(o):

                  "IRS" means the United States Internal Revenue Service.
                   ---

                  "Tax" or "Taxes" means federal, state, county, local, foreign,
      or other income, gross receipts, ad valorem, franchise,  profits, sales or
      use,   transfer,    registration,    excise,    utility,    environmental,
      communications,   real  or  personal  property,  capital  stock,  license,
      payroll,   wage  or  other  withholding,   employment,   social  security,
      severance, stamp, occupation, alternative or add-on minimum, estimated and
      other  taxes  of  any  kind  whatsoever  (including,  without  limitation,
      deficiencies,  penalties,  additions  to tax,  and  interest  attributable
      thereto) whether disputed or not.

                  "Tax Return"  means any return,  information  report or filing
      with  respect to Taxes,  including  any  schedules  attached  thereto  and
      including any amendment thereof.

(p)   Certain Fees.  Except as set forth on Schedule 2.1(p) hereto,  no brokers,
      finders or financial  advisory fees or commissions  will be payable by the
      Company or any subsidiary with respect to the transactions contemplated by
      this Agreement.

(q)   Disclosure. To the best of the Company's knowledge, neither this Agreement
      or  the  Schedules  hereto  nor  any  other  documents,   certificates  or
      instruments  furnished to the  Purchaser by or on behalf of the Company or
      any subsidiary in connection  with the  transactions  contemplated by this
      Agreement  contains any untrue  statement  of a material  fact or omits to
      state a  material  fact  necessary  in order to make the  statements  made
      herein or therein, in the light of the circumstances under which they were
      made herein or therein, not misleading.

(r)   Operation of Business.  The Company and each of the  subsidiaries  owns or
      possesses all patents, trademarks, service marks, trade names, copyrights,
      licenses  and  authorizations  as set  forth  in the SEC  Documents  or on
      Schedule  2.1(r)  hereto,  and all rights with  respect to the  foregoing,
      which are  necessary  for the  conduct of its  business  as now  conducted
      without any conflict with the rights of others.

(s)   Insurance.  Except as disclosed in the SEC Documents or on Schedule 2.1(s)
      hereto,  the Company carries or will have the benefit of insurance in such

<PAGE>

      amounts  and  covering  such risks as is  adequate  for the conduct of its
      business and the value of its properties and as is customary for companies
      engaging in similar businesses and similar industries.

(t)   Books and  Records.  The  records  and  documents  of the  Company and its
      subsidiaries  accurately  reflect in all material respects the information
      relating to the business of the Company and the subsidiaries, the location
      and collection of their assets, and the nature of all transactions  giving
      rise to the  obligations  or  accounts  receivable  of the  Company or any
      subsidiary.

(u)  Material  Agreements.  Except  as set  forth  in the SEC  Documents,  or on
     Schedule  2.1(u) hereto,  neither the Company nor any subsidiary is a party
     to  any  written  or  oral  contract,  instrument,  agreement,  commitment,
     obligation,  plan or  arrangement,  a copy of which would be required to be
     filed with the SEC as an exhibit to a registration statement on Form S-1 or
     other applicable form (collectively,  "Material Agreements") if the Company
     or any subsidiary  were  registering  securities  under the Securities Act.
     Except  as set  forth  on  Schedule  2.1(u),  the  Company  and each of its
     subsidiaries  has in all material  respects  performed all the  obligations
     required to be  performed by them to date under the  foregoing  agreements,
     have  received  no  notice of  default  and,  to the best of the  Company's
     knowledge  are not in default  under any Material  Agreement now in effect,
     the result of which could cause a Material  Adverse  Effect.  Except as set
     forth  in the SEC  Documents,  no  written  or oral  contract,  instrument,
     agreement, commitment, obligation, plan or arrangement of the Company or of
     any  subsidiary  limits or shall  limit the  payment  of  dividends  on the
     Company's Common Stock.

(v)  Transactions  with Affiliates.  Except as set forth in the SEC Documents or
     on  Schedule  2.1(v)  hereto,  there  are  no  loans,  leases,  agreements,
     contracts,  royalty  agreements,  management  contracts or  arrangements or
     other continuing  transactions  exceeding $100,000 between (A) the Company,
     any subsidiary or any of their respective customers or suppliers on the one
     hand,  and (B) on the other hand,  any  officer,  employee,  consultant  or
     director of the Company,  or any of its subsidiaries,  or any person owning
     5% or more of the  capital  stock of the Company or any  subsidiary  or any
     member of the  immediate  family  of such  officer,  employee,  consultant,
     director or  stockholder or any  corporation or other entity  controlled by
     such officer, employee, consultant, director or stockholder, or a member of
     the immediate  family of such officer,  employee,  consultant,  director or
     stockholder.

(w)  Securities  Laws.  The  Company  has  complied  and  will  comply  with all
     applicable  federal and state securities laws in connection with the offer,
     issuance and sale of the Shares  hereunder.  Neither the Company nor anyone
     acting on its behalf,  directly or indirectly,  has or will sell,  offer to
     sell or  solicit  offers to buy the  Shares or  similar  securities  to, or
     solicit  offers with respect  thereto from,  or enter into any  preliminary
     conversations or negotiations relating thereto with, any person (other than
     the  Purchaser),  so as to bring the  issuance and sale of the Shares under
     the  registration  provisions of the Securities  Act and  applicable  state
     securities  laws.  Neither the Company nor any of its  affiliates,  nor any
     person  acting on its or their  behalf,  has engaged in any form of general
     solicitation  or general  advertising  (within the meaning of  Regulation D
     under  the  Securities  Act) in  connection  with the  offer or sale of the
     Shares.

<PAGE>

(x)  Employees.  Neither  the  Company  nor any  subsidiary  has any  collective
     bargaining arrangements or agreements covering any of its employees. Except
     as set forth in the SEC Documents or on Schedule 2.1(x) hereto, neither the
     Company  nor  any  subsidiary  is in  breach  of any  employment  contract,
     agreement  regarding  proprietary  information,  noncompetition  agreement,
     nonsolicitation agreement,  confidentiality agreement, or any other similar
     contract or  restrictive  covenant,  relating to the right of any  officer,
     employee  or  consultant  to be  employed or engaged by the Company or such
     subsidiary.  Since the date of the December 31, 1999 Form 10-K (or 10-KSB),
     no officer,  consultant  or key  employee of the Company or any  subsidiary
     whose termination,  either  individually or in the aggregate,  could have a
     Material  Adverse  Effect,  has  terminated  or,  to the  knowledge  of the
     Company,  has any present intention of terminating his or her employment or
     engagement with the Company or any subsidiary.

(y)   Absence of Certain  Developments.  Except as disclosed in SEC Documents or
      on  Schedule  2.1(y)  hereto,  since the date of the  financial  statement
      contained  in the most  recently  filed Form 10-Q (or 10-QSB) or Form 10-K
      (or  10KSB),  whichever  is most  current,  neither  the  Company  nor any
      subsidiary has:

     (i) issued any stock,  bonds or other  corporate  securities or any rights,
options or warrants with respect thereto;

     (ii) borrowed any amount or incurred or become  subject to any  liabilities
(absolute or  contingent)  except current  liabilities  incurred in the ordinary
course of  business  which are  comparable  in nature and amount to the  current
liabilities  incurred in the ordinary  course of business  during the comparable
portion of its prior fiscal year, as adjusted to reflect the current  nature and
volume of the Company's or such subsidiary's business;

     (iii)  discharged  or  satisfied  any  lien  or  encumbrance  or  paid  any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;

     (iv) declared or made any payment or distribution of cash or other property
to stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;

     (v) sold,  assigned or transferred any other tangible  assets,  or canceled
any debts or claims, except in the ordinary course of business;

     (vi) sold,  assigned or transferred  any patent rights,  trademarks,  trade
names,  copyrights,  trade secrets or other  intangible  assets or  intellectual
property rights,  or disclosed any proprietary  confidential  information to any
person  except  to  customers  in the  ordinary  course  of  business  or to the
Purchaser or its representatives;

     (vii)  suffered  any  material  losses  (except  for   anticipated   losses
consistent with prior quarters) or waived any rights of material value,  whether

<PAGE>

or not in the ordinary course of business,  or suffered the loss of any material
amount of prospective business;

     (viii)  made any changes in employee  compensation  except in the  ordinary
course of business and consistent with past practices;

     (ix) made capital  expenditures  or commitments  therefor that aggregate in
excess of $500,000;

     (x)  entered  into any other  material  transaction,  whether or not in the
ordinary course of business;

     (xi) suffered any material damage, destruction or casualty loss, whether or
not covered by insurance;

     (xii)  experienced  any  material  problems  with  labor or  management  in
connection with the terms and conditions of their employment; or

     (xiii)  effected any two or more events of the foregoing  kind which in the
aggregate would be material to the Company or its subsidiaries.

(z)  Governmental  Approvals.  Except  as set forth in the SEC  Documents  or on
     Schedule  2.1(z)  hereto,  and except for the filing of any notice prior or
     subsequent to any  Settlement  Date that may be required  under  applicable
     federal or state  securities  laws (which if required,  shall be filed on a
     timely  basis),  including  the  filing  of  a  registration  statement  or
     post-effective  amendment  pursuant to this  Agreement,  no  authorization,
     consent,  approval,  license, exemption of, filing or registration with any
     court or governmental  department,  commission,  board,  bureau,  agency or
     instrumentality,  domestic or foreign,  is or will be necessary  for, or in
     connection with, the delivery of the Shares,  or for the performance by the
     Company of its obligations under this Agreement.

                  (aa) Use of Proceeds. The proceeds from the sale of the Shares
      will be used by the Company  and its  subsidiaries  for general  corporate
      purposes.

                  (bb) Acknowledgment  Regarding Purchaser's Purchase of Shares.
      Company  acknowledges  and agrees that  Purchaser is acting  solely in the
      capacity of arm's length  purchaser with respect to this Agreement and the
      transactions contemplated hereunder. The Company further acknowledges that
      the  Purchaser  is not acting as a financial  advisor or  fiduciary of the
      Company (or in any similar  capacity)  with respect to this  Agreement and
      the transactions contemplated hereunder. The Company further represents to
      the Purchaser that the Company's decision to enter into this Agreement has
      been based solely on (a) the Purchaser's representations and warranties in
      Section 3.2, and (b) the independent evaluation by the Company and its own
      representatives and counsel.

     (cc) Brokers and Finders Fees.  Except as set forth on Schedule 2.1(cc) and
GKN Securities  Corp., the Company does not owe any broker or finder any fees in
connection with the transaction contemplated under this Agreement.

<PAGE>

     Section 2.2. Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:

(a)   Organization and Standing of the Purchaser. The Purchaser is a corporation
      duly incorporated, validly existing and in good standing under the laws of
      the British Virgin Islands.

(b)  Authorization  and  Power.  The  Purchaser  has  the  requisite  power  and
     authority  to enter  into and  perform  the  Transaction  Documents  and to
     purchase the Shares being sold to it hereunder. The execution, delivery and
     performance of the Transaction  Documents by Purchaser and the consummation
     by it of the transactions  contemplated hereby have been duly authorized by
     all necessary  corporate action and at the Initial Closing shall constitute
     valid and binding  obligations  of the  Purchaser  enforceable  against the
     Purchaser in accordance with their terms, except as such enforceability may
     be   limited  by   applicable   bankruptcy,   insolvency,   reorganization,
     moratorium,  liquidation,  conservatorship,  receivership  or similar  laws
     relating to, or affecting  generally the enforcement of,  creditors' rights
     and remedies or by other equitable principles of general application

(c)  No Conflicts. The execution, delivery and performance of this Agreement and
     the consummation by the Purchaser of the transactions  contemplated  hereby
     or  relating  hereto do not and will not (i) result in a  violation  of the
     Purchaser's   charter  documents  or  bylaws  or  (ii)  conflict  with,  or
     constitute  a default  (or an event  which with  notice or lapse of time or
     both  would  become a  default)  under,  or give to  others  any  rights of
     termination,  amendment,  acceleration  or  cancellation  of any agreement,
     indenture or instrument  to which the Purchaser is a party,  or result in a
     violation of any law, rule, or regulation, or any order, judgment or decree
     of any court or  governmental  agency  applicable  to the  Purchaser or its
     properties  (except for such  conflicts,  defaults and  violations as would
     not,  individually or in the aggregate,  have a Material  Adverse Effect on
     Purchaser).   The   Purchaser  is  not  required  to  obtain  any  consent,
     authorization  or order of, or make any filing or  registration  with,  any
     court or governmental agency in order for it to execute, deliver or perform
     any of its  obligations  under this  Agreement or to purchase the Shares in
     accordance with the terms hereof.

(d)  Financial  Risks.  The Purchaser  acknowledges  that it is able to bear the
     financial risks associated with an investment in the Shares and that it has
     been given full access to such records of the Company and the  subsidiaries
     and to the  officers of the Company and the  subsidiaries  as it has deemed
     necessary or  appropriate to conduct its due diligence  investigation.  The
     Purchaser is capable of evaluating the risks and merits of an investment in
     the Shares by virtue of its  experience  as an investor and its  knowledge,
     experience,  and  sophistication  in financial and business matters and the
     Purchaser  is capable of bearing the entire loss of its  investment  in the
     Shares.

(e)  Accredited Investor.  The Purchaser is an "accredited  investor" as defined
     in Regulation D promulgated under the Securities Act.

(f)  General.  The  Purchaser  understands  that the Company is relying upon the
     truth  and  accuracy  of  the  representations,   warranties,   agreements,

<PAGE>

     acknowledgments  and  understandings  of the  Purchaser set forth herein in
     order to determine the suitability of the Purchaser to acquire the Shares.

                                    Article 3
                                    COVENANTS

     The Company covenants with the Purchaser as follows:

     Section 3.1. The Shares.  As of the date of each  applicable Draw Down, the
Company will have authorized and reserved,  free of preemptive  rights and other
similar  contractual  rights  of  stockholders,   a  sufficient  number  of  its
authorized  but  unissued  shares of its Common  Stock to cover the Shares to be
issued  in  connection  with  such Draw Down  requested  under  this  Agreement.
Anything in this Agreement to the contrary notwithstanding, (ii) the Company may
not make a Draw Down to the extent that,  after such purchase by the  Purchaser,
the sum of the  number  of  shares of  Common  Stock  beneficially  owned by the
Purchaser  and its  affiliates  would  result  in  beneficial  ownership  by the
Purchaser and its affiliates of more than 9.9% of the then outstanding shares of
Common Stock.  For purposes of the immediately  preceding  sentence,  beneficial
ownership  shall be determined in accordance  with Section 13(d) of the Exchange
Act.

     Section 3.2. Securities Compliance. If applicable, the Company shall notify
the Principal  Market,  in  accordance  with its rules and  regulations,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and  regulation,  for the legal and valid issuance of the Shares and the Warrant
to the Purchaser or subsequent holders.

     Section 3.3.  Registration  and Listing.  The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements  related to any registration
statement filed pursuant to this Agreement, and will not take any action or file
any document (whether or not permitted by the Securities Act or the Exchange Act
or the rules  promulgated  thereunder) to terminate or suspend such registration
or to  terminate  or suspend  its  reporting  and filing  obligations  under the
Exchange Act or Securities  Act,  except as permitted  herein.  The Company will
take all action necessary to continue the listing or trading of its Common Stock
on the  Principal  Market and will  comply in all  respects  with the  Company's
reporting,  filing  and  other  obligations  under  the  bylaws  or rules of the
Principal   Market  and  shall  provide  the   Purchaser   with  copies  of  any
correspondence  to or from such  Principal  Market which  questions or threatens
delisting of the Common  Stock,  within three (3) Trading Days of the  Company's
receipt thereof, until the Purchaser has disposed of all of the Shares.

     Section 3.4. Escrow Arrangement.  The Company and the Purchaser shall enter
into an escrow  arrangement  with  Epstein  Becker & Green,  P.C.  (the  "Escrow
Agent") in the form of Exhibit B hereto  respecting  payment against delivery of
the Shares.

     Section 3.5.  Registration Rights Agreement.  The Company and the Purchaser
shall  enter into the  Registration  Rights  Agreement  in the Form of Exhibit A
hereto.  Before the  Purchaser  shall be obligated to accept a Draw Down request

<PAGE>

from the Company, the Company shall have caused a sufficient number of shares of
Common  Stock to be  registered  to cover the Shares to be issued in  connection
with such Draw Down.

     Section 3.6. Accuracy of Registration  Statement.  On each Settlement Date,
the  Registration  Statement  and the  prospectus  therein shall not contain any
untrue  statement of a material  fact or omit to state any  material  fact to be
required  to be stated  therein  or  necessary  in order to make the  statements
therein not misleading in light of the circumstances under which they were made;
and on such Settlement Date or date of filing of the Registration  Statement and
the prospectus  therein will not include any untrue statement of a material fact
or omit to state a  material  fact  necessary  in  order to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading;   provided,   however,  the  Company  makes  no  representations  or
warranties as to the information  contained in or omitted from the  Registration
Statement and the prospectus therein in reliance upon and in conformity with the
information  furnished in writing to the Company by the  Purchaser  specifically
for inclusion in the Registration Statement and the prospectus therein.

     Section 3.7. Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply,  with all applicable laws, rules,  regulations and orders,
noncompliance with which could have a Material Adverse Effect.

     Section  3.8.  Keeping of Records and Books of Account.  The Company  shall
keep and cause each subsidiary to keep adequate records and books of account, in
which  complete  entries  will be  made in  accordance  with  GAAP  consistently
applied,   reflecting  all  financial   transactions  of  the  Company  and  its
subsidiaries,  and in which,  for each  fiscal  year,  all proper  reserves  for
depreciation, depletion, obsolescence,  amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

     Section  3.9.  Other  Agreements.  The  Company  shall not  enter  into any
agreement the terms of which such agreement would restrict or impair the ability
of the Company to perform its obligations under this Agreement.

     Section 3.10. Notice of Certain Events Affecting  Registration;  Suspension
of Right to  Request a Draw  Down.  The  Company  will  immediately  notify  the
Purchaser  in  writing  and obtain an  acknowledgment  from  Purchaser  upon the
occurrence  of  any of the  following  events  in  respect  of the  Registration
Statement  or related  prospectus  in respect of the Shares:  (i) receipt of any
request for  additional  information  from the SEC or any other federal or state
governmental  authority  during the period of  effectiveness of the Registration
Statement the response to which would require any  amendments or  supplements to
the Registration  Statement or related prospectus;  (ii) the issuance by the SEC
or  any  other  federal  or  state  governmental  authority  of any  stop  order
suspending the effectiveness of the Registration  Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Shares for sale in any  jurisdiction or the initiation or threatening of any
proceeding  for such  purpose;  (iv) the  happening  of any event that makes any
statement  made in the  Registration  Statement  or  related  prospectus  or any
document  incorporated or deemed to be incorporated  therein by reference untrue
in any  material  respect  or that  requires  the  making of any  changes in the
Registration Statement,  related prospectus or documents so that, in the case of
the  Registration  Statement,  it will not  contain  any untrue  statement  of a
material fact or omit to state any material  fact required to be stated  therein

<PAGE>

or necessary to make the statements therein not misleading, and that in the case
of the  related  prospectus,  it will not  contain  any  untrue  statement  of a
material fact or omit to state any material  fact required to be stated  therein
or necessary to make the statements  therein,  in the light of the circumstances
under which they were made,  not  misleading;  and (v) the Company's  reasonable
determination  that a  post-effective  amendment to the  Registration  Statement
would be  appropriate.  The Company  shall not deliver to the Purchaser any Draw
Down Notice during the continuation of any of the foregoing events.  The Company
shall  promptly  make  available  to  the  Purchaser  any  such  supplements  or
amendments  to  the  related  prospectus,  at  which  time,  provided  that  the
registration  statement  and any  supplements  and  amendments  thereto are then
effective, the Company may recommence the delivery of Draw Down Notices.

     Section  3.11.  Consolidation;  Merger.  The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if not the  Company)  assumes by  written  instrument  or by
operation of law the obligation to deliver to the Purchaser such shares of stock
and/or  securities  as the  Purchaser  is entitled  to receive  pursuant to this
Agreement.

     Section 3.12.  Limitation  on Future  Financing.  The Company  agrees that,
except as set forth below, it will not enter into any sale of its securities for
cash at a discount  to the  current  market  price  until the  earlier of (i) 20
months  from the  Effective  Date,  or (ii)  sixty  (60) days  after the  entire
Commitment  Amount has been purchased by the Purchaser.  The foregoing shall not
prevent or limit the Company from  engaging in any sale of  securities  (i) in a
registered  public  offering by the Company which is underwritten by one or more
established  investment  banks (not including an equity line type of financing),
(ii)  in one or  more  private  placements  where  the  purchasers  do not  have
registration rights, (iii) pursuant to any presently existing or future employee
benefit  plan  which  plan  has  been  or  will  be  approved  by the  Company's
stockholders, (iv) pursuant to any compensatory plan for a full-time employee or
key consultant, (v) in connection with a strategic partnership or other business
transaction,  the  principal  purpose of which is not simply to raise money,  or
(vi) to which Purchaser gives its prior written consent.  Further, the Purchaser
shall have a right of first refusal, to elect to participate, in such subsequent
transaction in the case of (i), (ii) and (vi) above. Such right of first refusal
must be  exercised in writing  within seven (7) Trading Days of the  Purchaser's
receipt of notice of the proposed terms of such financing.

            The Purchaser covenants with the Company as follows:

     Section 3.13. Compliance with Law.

     The Purchaser agrees that its trading  activities with respect to shares of
the Company's  Common Stock will be in compliance with all applicable  state and
federal  securities laws, rules and regulations and rules and regulations of the
Principal Market on which the Company's Common Stock is listed. Without limiting
the generality of the  foregoing,  the Purchaser  agrees that it will,  whenever
required by federal  securities  laws,  deliver the  prospectus  included in the
Registration Statement to any purchaser of Shares from the Purchaser.

<PAGE>

                                    Article 4
                  CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS

     Section 4.1. Conditions  Precedent to the Obligation of the Company to Sell
the Shares.  The  obligation  hereunder  of the Company to proceed to close this
Agreement  and to issue and sell the Shares to the  Purchaser  is subject to the
satisfaction  or  waiver,  at or  before  the  Initial  Closing,  and as of each
Settlement Date of each of the conditions set forth below.  These conditions are
for the  Company's  sole benefit and may be waived by the Company at any time in
its sole discretion.

(a)   Accuracy  of  the  Purchaser's   Representations   and   Warranties.   The
      representations  and warranties of the Purchaser shall be true and correct
      in all  material  respects  as of the date when made and as of the Initial
      Closing and as of each Settlement Date as though made at that time, except
      for representations and warranties that speak as of a particular date.

(b)   Performance  by  the  Purchaser.   The  Purchaser  shall  have  performed,
      satisfied  and  complied  in  all  material  respects  with  all  material
      covenants,  agreements  and  conditions  required by this  Agreement to be
      performed,  satisfied or complied with by the Purchaser at or prior to the
      Initial Closing and as of each Settlement Date.

(c)   No Injunction.  No statute,  rule,  regulation,  executive order,  decree,
      ruling or injunction  shall have been  enacted,  entered,  promulgated  or
      endorsed by any court or governmental  authority of competent jurisdiction
      which prohibits the consummation of any of the  transactions  contemplated
      by this Agreement.

     Section 4.2.  Conditions  Precedent to the  Obligation  of the Purchaser to
Close.  The  obligation  hereunder of the  Purchaser to perform its  obligations
under this  Agreement and to purchase the Shares is subject to the  satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below.  These  conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.

(a)   Accuracy of the  Company's  Representations  and  Warranties.  Each of the
      representations and warranties of the Company shall be true and correct in
      all  material  respects  as of the date  when  made and as of the  Initial
      Closing  as  though  made at that time  (except  for  representations  and
      warranties that speak as of a particular date).

(b)   Performance by the Company.  The Company shall have  performed,  satisfied
      and complied in all respects with all covenants, agreements and conditions
      required by this Agreement to be performed,  satisfied or complied with by
      the Company at or prior to the Initial Closing.

(c)   No Injunction.  No statute,  rule,  regulation,  executive order,  decree,
      ruling or injunction  shall have been  enacted,  entered,  promulgated  or
      endorsed by any court or governmental  authority of competent jurisdiction
      which prohibits the consummation of any of the  transactions  contemplated
      by this Agreement.

(d)   No  Proceedings or Litigation.  No action,  suit or proceeding  before any
      arbitrator or any governmental authority shall have been commenced, and no

<PAGE>

      investigation  by any  governmental  authority shall have been threatened,
      against  the  Purchaser  or the Company or any  subsidiary,  or any of the
      officers, directors or affiliates of the Company or any subsidiary seeking
      to  restrain,  prevent or change  the  transactions  contemplated  by this
      Agreement, or seeking damages in connection with such transactions.

(e)   Opinion of Counsel,  Etc. At the Initial Closing, the Purchaser shall have
      received  an opinion of counsel to the  Company,  dated as of the  Initial
      Closing Date, in the form of Exhibit C hereto.

(f)  Warrant.  On the  Initial  Closing  Date,  the  Company  shall issue to the
     Purchaser  a warrant  certificate  to  purchase up to a number of shares of
     Common Stock equal to $2,000,000  divided by the average of the closing bid
     prices  during the  fifteen  (15)  Trading  Days  immediately  prior to the
     Initial  Closing Date (the "Warrant Base Price").  The Warrant shall have a
     term from its initial  date of exercise  of three (3) years.  The  exercise
     price of the Warrant  shall be 110% of the Warrant  Base Price.  The Common
     Stock  underlying  the  Warrant  will  be  registered  in the  Registration
     Statement  referred to in Section 4.3 hereof.  The Warrant  shall be in the
     form of Exhibit E hereto.

     Section 4.3.  Conditions  Precedent to the  Obligation  of the Purchaser to
Accept a Draw Down and  Purchase  the Shares.  The  obligation  hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the  satisfaction at or before each  Settlement  Date, of each of the
conditions set forth below.

(a)  Satisfaction  of  Conditions  to Initial  Closing.  The Company  shall have
     satisfied,  or the Purchaser shall have waived at the Initial Closing,  the
     conditions set forth in Section 4.2 hereof

(b)  Effective  Registration  Statement.  The Registration Statement registering
     the Shares shall have been  declared  effective by the SEC and shall remain
     effective on each Settlement Date.

(c)  No  Suspension.  Trading in the Company's  Common Stock shall not have been
     suspended by the SEC or the Principal  Market (except for any suspension of
     trading of limited  duration  agreed to by the  Company,  which  suspension
     shall be terminated  prior to the delivery of each Draw Down Notice),  and,
     at any time prior to such Draw Down Notice, trading in securities generally
     as  reported  on the  Principal  Market  shall not have been  suspended  or
     limited,  or minimum  prices shall not have been  established on securities
     whose  trades are  reported  on the  Principal  Market  unless the  general
     suspension or limitation  shall have been terminated  prior to the delivery
     of such Draw Down Notice.

(d)  Material  Adverse Effect.  No Material  Adverse Effect and no Consolidation
     Event where the  successor  entity has not agreed to perform the  Company's
     obligations shall have occurred.

(e)   Opinion of Counsel. The Purchaser shall have received (i) a "down-to-date"
      letter from the Company's counsel, confirming that there is no change from
      the  counsel's  previously  delivered  opinion,  or else  specifying  with

<PAGE>

      particularity  the  reason  for  any  change  and  an  opinion  as to  the
      additional  items specified in Exhibit C hereto,  and (ii) any other items
      set forth in the Escrow Agreement.

                                   Article 5
                                 DRAW DOWN TERMS

     Section 5.1. Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:

(a)   The Company,  may, in its sole discretion,  issue and exercise a draw down
      (a "Draw Down") during each Draw Down Pricing Period,  which Draw Down the
      Purchaser shall be obligated to accept during the Commitment Period.

(b)   Only one Draw Down  shall be  allowed  in each Draw Down  Pricing  Period.
      There shall be at least five (5) Trading  Days  between  Draw Down Pricing
      Periods.  The number of shares of Common Stock  purchased by the Purchaser
      with respect to each Draw Down shall be determined as set forth in Section
      5.1(e) herein and settled on:

(i)               as to the 1st through the 11th  Trading Days after a Draw Down
                  Pricing  Period  commences,  on or before the 13th Trading Day
                  after a Draw Down Pricing Period commences; and

(ii)              as to the 12th through the 22nd Trading Days after a Draw Down
                  Pricing  Period  commences,  on or before the 24th Trading Day
                  after a Draw Down Pricing Period (such settlement  periods and
                  such  settlement  dates in subsection (i) and this  subsection
                  (ii)  each  referred  to  as  a  "Settlement   Period"  and  a
                  "Settlement Date", respectively).

(c)  In connection with each Draw Down Pricing  Period,  the Company may set the
     Threshold Price in the Draw Down Notice.

(d)   The minimum  Investment Amount for any Draw Down shall be $100,000 and the
      maximum  Investment Amount as to each Draw Down shall be the lesser of (i)
      $1,000,000, and (ii) 4.5% of the average of the VWAPs for the Common Stock
      for the sixty (60) calendar day period immediately prior to the applicable
      Commencement  Date (defined below)  multiplied by the total trading volume
      in  respect of the Common  Stock for the sixty  (60)  calendar  day period
      immediately prior to such Commencement Date.

(e)   The number of Shares of Common Stock to be issued on each  Settlement Date
      shall be a number of shares  equal to the sum of the  quotients  (for each
      trading day within the Settlement  Period) of (x) 1/22nd of the Investment
      Amount,  and  (y) the  Purchase  Price  on each  Trading  Day  within  the
      Settlement Period, subject to the following adjustments:

<PAGE>

(i)         if the VWAP on a given Trading Day is less than the Threshold Price,
            then the  Investment  Amount  will be reduced by 1/22nd and that day
            shall be withdrawn from the Settlement Period;

(ii)        trading of the Common Stock on the Principal Market is suspended for
            more than three (3) hours,  in the  aggregate,  on any  Trading  Day
            during the Settlement Period, the Investment Amount shall be reduced
            by  1/22nd  and that  day  shall be  withdrawn  from the  applicable
            Settlement Period; and

(iii)       if the  Registration  Statement  is  suspended  in  accordance  with
            Section  3(j) of the  Registration  Rights  Agreement  for more than
            three (3) hours,  in the  aggregate,  on any  Trading Day during the
            applicable Settlement Period, the Investment Amount shall be reduced
            by 1/22nd and that day shall be withdrawn  from the such  Settlement
            Period.

(f)  The Company must inform the Purchaser by delivering a draw down notice,  in
     the form of  Exhibit D hereto  (the  "Draw  Down  Notice"),  via  facsimile
     transmission  in  accordance  with Section 9.4 as to the amount of the Draw
     Down (the "Investment  Amount") the Company wishes to exercise,  before the
     first day of the Draw Down Pricing Period (the "Commencement Date"). If the
     Commencement Date is to be the date of the Draw Down Notice,  the Draw Down
     Notice must be delivered to and receipt confirmed by the Purchaser at least
     one hour  before  trading  commences  on such  date.  At no time  shall the
     Purchaser be required to purchase more than the maximum  Investment  Amount
     for a given Draw Down Pricing Period so that if the Company  chooses not to
     exercise the maximum  Investment Amount in a given Draw Down Pricing Period
     the  Purchaser is not  obligated  to and shall not  purchase  more than the
     scheduled  maximum  Investment  Amount in a  subsequent  Draw Down  Pricing
     Period.

(g)  On or before each  Settlement  Date, the Shares  purchased by the Purchaser
     shall be delivered to The Depository  Trust Company  ("DTC") account of the
     Purchaser or its  designees  via the Deposit  Withdrawal  Agent  Commission
     ("DWAC")  system upon  receipt by the Escrow  Agent of payment for the Draw
     Down Shares  into the Escrow  Agent's  master  escrow  account,  as further
     provided in the Escrow Agreement. The Escrow Agent shall be directed to pay
     the Purchase Price to the Company, net of one thousand dollars ($1,000) per
     Settlement as escrow  expenses to the Escrow Agent and any additional  fees
     as set forth in the Escrow Agreement.

                                   Article 6
                                   TERMINATION

     Section  6.1.  Term.  The term of this  Agreement  shall  begin on the date
hereof and shall end 20 months from the Effective Date or as otherwise set forth
in Section 6.2.

     Section 6.2. Other Termination.

(a)   This Agreement shall terminate upon one (1) Trading Day's notice if (i) an
      event resulting in a Material Adverse Effect has occurred and has not been

<PAGE>

      cured for a period of 60 days, (ii) the Common Stock is de-listed from the
      Principal  Market  unless  such  de-listing  is  in  connection  with  the
      Company's  subsequent  listing of the Common Stock on the Nasdaq  National
      Market,  Nasdaq  SmallCap  Market,  the American Stock Exchange or the New
      York  Stock  Exchange,  or (iii) the  Company  files for  protection  from
      creditors under any applicable law.

(b)   The Company may terminate this Agreement upon one (1) Trading Day's notice
      if the  Purchaser  shall fail to fund more than one properly  noticed Draw
      Down within five (5) Trading Days of the end of the applicable  Settlement
      Period.

            Section 6.3 Effect of  Termination.

     In the event of termination by the Company or the Purchaser, written notice
thereof  shall  forthwith  be  given to the  other  party  and the  transactions
contemplated  by this Agreement  shall be terminated  without  further action by
either party.  If this Agreement is terminated as provided in Section 6.1 or 6.2
herein,  this  Agreement  shall become void and of no further  force and effect,
except for Sections  8.1 and 8.2, and Article 7 herein.  Nothing in this Section
6.3 shall be deemed to release the Company or the  Purchaser  from any liability
for any breach under this  Agreement,  or to impair the rights of the Company or
the  Purchaser  to  compel  specific  performance  by  the  other  party  of its
obligations under this Agreement.

                                   Article 7
                                 INDEMNIFICATION

Section 7.1.      General Indemnity.
                  -----------------

(a)   The Company  agrees to indemnify and hold harmless the Purchaser  (and its
      directors,  officers, affiliates, agents, successors and assigns) from and
      against any and all losses, liabilities,  deficiencies, costs, damages and
      expenses  (including,  without  limitation,  reasonable  attorneys'  fees,
      charges and  disbursements)  incurred by the  Purchaser as a result of any
      inaccuracy  in or breach of the  representations,  warranties or covenants
      made by the Company herein.

(b)  The  Purchaser  agrees to indemnify  and hold  harmless the Company and its
     directors,  officers,  affiliates,  agents, successors and assigns from and
     against any and all losses, liabilities,  deficiencies,  costs, damages and
     expenses  (including,  without  limitation,   reasonable  attorneys'  fees,
     charges  and  disbursements)  incurred  by the  Company  as  result  of any
     material  inaccuracy  in or breach of the  representations,  warranties  or
     covenants  made by the Purchaser  herein.  Notwithstanding  anything to the
     contrary  herein,  the Purchaser  shall be liable under this Section 7.1(b)
     for only that amount as does not exceed the net  proceeds to the  Purchaser
     as a result of the sale of the Shares.

     Section   7.2.   Indemnification   Procedure.   Any   party   entitled   to
indemnification  under this Article 7 (an "Indemnified Party") will give written
notice  to the  indemnifying  party of any  matters  giving  rise to a claim for
indemnification;   provided,   that  the  failure  of  any  party   entitled  to
indemnification  hereunder  to give notice as provided  herein shall not relieve
the  indemnifying  party of its  obligations  under this Article 7 except to the
extent that the  indemnifying  party is actually  prejudiced  by such failure to
give  notice.  In case any  action,  proceeding  or claim is brought  against an
Indemnified Party in respect of which  indemnification is sought hereunder,  the

<PAGE>

indemnifying  party  shall be  entitled  to  participate  in and,  unless in the
reasonable  judgment of counsel to the Indemnified  Party a conflict of interest
between it and the  indemnifying  party may exist with  respect of such  action,
proceeding  or claim,  to assume the defense  thereof  with  counsel  reasonably
satisfactory to the Indemnified  Party. In the event that the indemnifying party
advises  an   Indemnified   Party  that  it  will   contest  such  a  claim  for
indemnification  hereunder,  or fails, within thirty (30) days of receipt of any
indemnification  notice to notify,  in writing,  such person of its  election to
defend,  settle  or  compromise,  at its sole  cost  and  expense,  any  action,
proceeding or claim (or  discontinues its defense at any time after it commences
such defense),  then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the  indemnifying  party  elects in  writing  to assume  and does so assume  the
defense of any such claim,  proceeding or action, the Indemnified  Party's costs
(including  reasonable  attorneys' fees, charges and disbursements) and expenses
arising out of the defense,  settlement or compromise of any such action,  claim
or  proceeding  shall  be  losses  subject  to  indemnification  hereunder.  The
Indemnified  Party  shall  cooperate  fully  with  the  indemnifying   party  in
connection  with any  settlement  negotiations  or defense of any such action or
claim by the indemnifying  party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which relates to such
action or claim. The indemnifying  party shall keep the Indemnified  Party fully
apprised  at  all  times  as to the  status  of the  defense  or any  settlement
negotiations  with respect thereto.  If the indemnifying  party elects to defend
any such  action or claim,  then the  Indemnified  Party  shall be  entitled  to
participate  in such  defense  with  counsel  of its choice at its sole cost and
expense.  The  indemnifying  party shall not be liable for any settlement of any
action,  claim  or  proceeding  effected  without  its  prior  written  consent.
Notwithstanding  anything in this Article 7 to the  contrary,  the  indemnifying
party shall not, without the Indemnified  Party's prior written consent,  settle
or compromise  any claim or consent to entry of any judgment in respect  thereof
which imposes any future  obligation on the Indemnified  Party or which does not
include,  as an  unconditional  term thereof,  the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim.  The  indemnification  required  by this  Article 7 shall be made by
periodic  payments of the amount thereof during the course of  investigation  or
defense, as and when bills are received or expense, loss, damage or liability is
incurred,  within  ten  (10)  Trading  Days of  written  notice  thereof  to the
indemnifying party so long as the Indemnified Party irrevocably agrees to refund
such  moneys,  with  interest,  if it is  ultimately  determined  by a court  of
competent jurisdiction that such party was not entitled to indemnification.  The
indemnity  agreements  contained herein shall be in addition to (a) any cause of
action or similar rights of the Indemnified Party against the indemnifying party
or  others,  and (b) any  liabilities  to which  the  indemnifying  party may be
subject. Article 8
                                  MISCELLANEOUS

     Section 8.1. Fees and Expenses. Each of the parties to this Agreement shall
pay its own fees and expenses related to the  transactions  contemplated by this
Agreement;  except  that,  the  Company  shall pay, at the  Initial  Closing,  a
non-accountable  expense  allowance  of $25,000  for the  Purchaser's  legal and
administrative  costs and  expenses.  In  addition,  the  Company  shall pay all
reasonable  fees and expenses  incurred by the Purchaser in connection  with any
subsequent  amendments,  modifications or waivers of this Agreement,  the Escrow
Agreement or the  Registration  Rights  Agreement or incurred in connection with
the enforcement of this  Agreement,  the Escrow  Agreement and the  Registration
Rights Agreement,  including, without limitation, all reasonable attorneys' fees

<PAGE>

and  expenses if such  subsequent  amendment,  modification  or waiver is at the
request of the Company.  The Company  shall pay all stamp or other similar taxes
and duties levied in connection with issuance of the Shares pursuant hereto.

     Section  8.2.   Specific   Enforcement.   The  Company  and  the  Purchaser
acknowledge and agree that irreparable  damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance  with their
specific terms or were  otherwise  breached.  It is accordingly  agreed that the
parties  shall be entitled to an injunction  or  injunctions  to prevent or cure
breaches of the  provisions of this  Agreement and to enforce  specifically  the
terms and  provisions  hereof or  thereof,  this being in  addition to any other
remedy to which any of them may be entitled by law or equity.

     Section 8.3. Entire Agreement; Amendment. The Transaction Documents contain
the entire  understanding  of the parties with respect to the matters covered in
the  Transaction  Documents.  No  provision of this  Agreement  may be waived or
amended  other than by a written  instrument  signed by the party  against  whom
enforcement  of any such  amendment  or  waiver is sought  and no  condition  to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.

     Section  8.4.  Notices.  Any  notice,  demand,  request,  waiver  or  other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be  effective  (a) upon hand  delivery or  facsimile at the address or
number  designated  below (if delivered on a business day during normal business
hours where such notice is to be received),  or the first business day following
such delivery (if delivered  other than on a business day during normal business
hours where such notice is to be  received)  or (b) on the second  business  day
following  the date of  mailing  by  express  courier  service,  fully  prepaid,
addressed to such address,  or upon actual  receipt of such  mailing,  whichever
shall first occur. The addresses for such communications shall be:

If to the Company:            800 Sheppard Avenue West
                              Commercial Unit 1
                              North York, Ontario, Canada M3H 6B4
                              Attn:  Alan Drizen
                              Tel: (416) 633-3004
                              Fax:

With copies to:               Hart and Trinen L.L.P.
(which shall not constitute   1624 Washington Street
notice)                       Denver, CO 80203
                              Attn: William Hart, Esq.
                              Tel: (303) 839-0061
                              Fax: (303) 839-5414

If to Purchaser:              c/o Mischon deReya Solicitors
                              21 Southhampton Row
                              London WC1B 5HS England
                              Attn: Kevin Gold
                              Fax: 011 44 171 404 5982

<PAGE>

with copies to:               Epstein Becker & Green P.C.
(which shall not constitute   250 Park Avenue
notice)                       New York, NY  10177-1211
                              Tel:  (212) 351-3771
                              Fax:  (212) 661-0989
                              Attn:  Robert F. Charron

            Any  party  hereto  may from time to time  change  its  address  for
notices by giving  written  notice of such  changed  address to the other  party
hereto in accordance  herewith.  Section 8.5. Waivers. No waiver by either party
of any default with respect to any  provision,  condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provisions,  condition or requirement  hereof,  nor shall any delay or
omission of any party to exercise any right  hereunder in any manner  impair the
exercise of any such right accruing to it thereafter.

     Section 8.6. Headings. The article, section and subsection headings in this
Agreement  are for  convenience  only and  shall not  constitute  a part of this
Agreement  for any other  purpose and shall not be deemed to limit or affect any
of the provisions hereof.

     Section 8.7.  Successors and Assigns.  This Agreement shall be binding upon
and inure to the benefit of the parties and their  successors  and assigns.  The
parties  hereto  may not amend  this  Agreement  or any  rights  or  obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment.  After Initial Closing,  the assignment by a party
to this Agreement of any rights  hereunder  shall not affect the  obligations of
such party under this Agreement.

     Section  8.8. No Third Party  Beneficiaries.This  Agreement is intended for
the benefit of the parties hereto and their respective  permitted successors and
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other person.

     Section 8.9. Governing Law/Arbitration. This Agreement shall be governed by
and  construed in  accordance  with the internal  laws of the State of New York,
without  giving  effect to the choice of law  provisions.  The  Company  and the
Purchaser  agree to submit  themselves  to the in personam  jurisdiction  of the
state and federal courts situated  within the Southern  District of the State of
New York with  regard to any  controversy  arising  out of or  relating  to this
Agreement. Any dispute under this Agreement or any Exhibit attached hereto shall
be submitted to  arbitration  under the American  Arbitration  Association  (the
"AAA")  in New York  City,  New  York,  and shall be  finally  and  conclusively
determined  by the decision of a board of  arbitration  consisting  of three (3)
members  (hereinafter  referred  to as the "Board of  Arbitration")  selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration)  with  respect to the  amount,  if any,  which the losing  party is
required to pay to the other party in respect of a claim  filed.  In  connection
with  rendering its decisions,  the Board of Arbitration  shall adopt and follow
the laws of the State of New York.  To the extent  practical,  decisions  of the
Board of  Arbitration  shall be rendered no more than thirty (30)  calendar days
following  commencement  of  proceedings  with  respect  thereto.  The  Board of
Arbitration  shall cause its written  decision  to be  delivered  to all parties

<PAGE>

involved in the dispute.  The Board of  Arbitration  shall be authorized  and is
directed to enter a default  judgment  against any party refusing to participate
in the  arbitration  proceeding  within  thirty  days of any  deadline  for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the  expiration  of such thirty (30)  calendar day period) shall be final,
binding  and  conclusive  on the  parties to the  dispute,  and  entitled  to be
enforced  to the  fullest  extent  permitted  by law and entered in any court of
competent  jurisdiction.  The  prevailing  party  shall be  awarded  its  costs,
including  attorneys'  fees,  from  the  non-prevailing  party  as  part  of the
arbitration award. Any party shall have the right to seek injunctive relief from
any court of competent  jurisdiction in any case where such relief is available.
The  prevailing  party in such  injunctive  action  shall be awarded  its costs,
including reasonable attorneys' fees, from the non-prevailing party.

     Section 8.10. Counterparts. This Agreement may be executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties  hereto,  it being  understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.

     Section 8.11. Publicity.  Neither the Company nor the Purchaser shall issue
any press release or otherwise make any public  statement or  announcement  with
respect  to  this  Agreement  or the  transactions  contemplated  hereby  or the
existence of this Agreement.  After the Initial Closing, the Company may issue a
press release or otherwise make a public statement or announcement  with respect
to this Agreement or the  transactions  contemplated  hereby or the existence of
this Agreement; provided, however, that prior to issuing any such press release,
making any such public statement or announcement,  the Company obtains the prior
consent of the Purchaser,  which consent shall not be  unreasonably  withheld or
delayed.

     Section 8.12. Severability.  The provisions of this Agreement are severable
and, in the event that The Board of Arbitration or any court or officials of any
regulatory agency of competent jurisdiction shall determine that any one or more
of the provisions or part of the provisions  contained in this Agreement  shall,
for any reason, be held to be invalid,  illegal or unenforceable in any respect,
such  invalidity,  illegality  or  unenforceability  shall not  affect any other
provision or part of a provision of this Agreement and this  Agreement  shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such  provision,  had  never  been  contained  herein,  so that  such
provisions would be valid, legal and enforceable to the maximum extent possible,
so long as such construction  does not materially  adversely effect the economic
rights of either party hereto.

     Section  8.13.  Further  Assurances.  From  and  after  the  date  of  this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the  Purchaser  shall  execute and deliver such  instruments,  documents and
other writings as may be reasonably  necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.

     Section 8.14.  Effectiveness  of  Agreement.  This  Agreement  shall become
effective  only upon  satisfaction  of the  conditions  precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.

<PAGE>

                                    Article 9
                                   DEFINITIONS

Section 9.1.      Certain Definitions.
                  -------------------

     (a)  "Commitment  Amount"  shall have the meaning  assigned to such term in
Section 1.1 hereof.

     (b)  "Commitment  Period"  shall mean the period of 20  consecutive  months
commencing immediately after the Effective Date.

     (c) "Common Stock" shall mean the Company's common stock, $0.0001 par value
per share.

     (d) "Draw  Down"  shall have the  meaning  assigned to such term in Section
5.1(a) hereof.

     (e) "Draw Down  Notice"  shall have the  meaning  assigned  to such term in
Section 5.1(f) hereof.

     (f) "Draw  Down  Pricing  Period"  shall mean a period of  twenty-two  (22)
consecutive Trading Days beginning on the date specified in the Draw Down Notice
(as defined in Section 5.1(f) herein); provided,  however, the Draw Down Pricing
Period  shall  not  begin  before  the day on which  receipt  of such  notice is
confirmed by the Purchaser.

     (g) "Effective Date" shall mean the date the Registration  Statement of the
Company covering the Shares being subscribed for hereby is declared effective by
the Securities and Exchange Commission (the "SEC").

     (h) "Exchange  Act" shall mean the  Securities and Exchange Act of 1934, as
amended.

     (i) "GAAP"  shall  mean the United  States  Generally  Accepted  Accounting
Principles as those  conventions,  rules and  procedures  are  determined by the
Financial Accounting Standards Board and its predecessor agencies.

     (j)  "Initial  Closing"  shall have the  meaning  assigned  to such term in
Section 1.2 hereof.

     (k) "Initial  Closing Date" shall have the meaning assigned to such term in
Section 1.2 hereof.

     (l)  "Investment  Amount"  shall have the meaning  assigned to such term in
Section 5.1(f) hereof.

     (m)  "Material  Adverse  Effect"  shall  mean  any  adverse  effect  on the
business,  operations,  properties,  prospects  or  financial  condition  of the
Company  that is material  and adverse to the Company and its  subsidiaries  and
affiliates,  taken as a whole and/or any condition,  circumstance,  or situation
that would  prohibit or otherwise  materially  interfere with the ability of the

<PAGE>

Company to perform any of its material  obligations  under this Agreement or the
Registration  Rights  Agreement  or to perform its  obligations  under any other
Material Agreement (as defined in Section 2.1(u)).

                  (g)  "Principal  Market" shall mean initially the OTC Bulletin
      Board and shall include the Nasdaq  National  Market,  the American  Stock
      Exchange,  Nasdaq  Small-Cap Market and the New York Stock Exchange if the
      Company  becomes  listed and trades on such market or  exchange  after the
      date hereof.

     (h) "Purchase Price" shall mean 90% of the VWAP on the date in question.

                  (i)  "Registration  Statement"  shall  mean  the  registration
      statement  under the Securities  Act of 1933, as amended (the  "Securities
      Act"),  to be filed with the  Securities  and Exchange  Commission for the
      registration of the Shares pursuant to the  Registration  Rights Agreement
      attached hereto as Exhibit A (the "Registration Rights Agreement).

                  (j) "SEC Documents"  shall mean the Company's latest Form 10-K
      or Form  10-KSB as of the time in  question,  all Forms 10-Q or 10-QSB and
      8-K filed  thereafter,  and the Proxy Statement for its latest fiscal year
      as of the time in question until such time as the Company no longer has an
      obligation to maintain the  effectiveness  of a Registration  Statement as
      set forth in the Registration Rights Agreement.

     (n) "Settlement" shall mean the delivery of the Shares into the Purchaser's
DTC account in exchange for payment therefor.

                  (k) "Settlement  Date" shall have the meaning assigned to such
      term in Section 5.1(b).

                  (l)  "Settlement  Period"  shall have the meaning  assigned to
      such term in Section 5.1(b).

                  (m) "Shares"  shall mean,  collectively,  the shares of Common
      Stock of the  Company  being  subscribed  for  hereunder  (the  "Draw Down
      Shares") and those shares of Common Stock  issuable to the Purchaser  upon
      exercise of the Warrant (the "Warrant Shares").

                  (n)   "Threshold   Price"  shall  mean  the  price  per  Share
      designated  by the Company as the lowest VWAP during any Draw Down Pricing
      Period at which the Company will sell its Common Stock in accordance  with
      this Agreement.

     (o) "Trading Day" shall mean any day on which the Principal  Market is open
for business.

     (o)  "Transaction  Documents"  shall mean this Agreement,  the Registration
Rights Agreement and the Escrow Agreement.

<PAGE>

                  (p) "VWAP" shall mean the daily volume weighted  average price
      of the  Company's  Common  Stock on the  Principal  Market as  reported by
      Bloomberg  Financial L.P.  (based on a trading day from 9:30 a.m.  Eastern
      Time to 4:02 p.m.  Eastern  Time)  using the VAP  function  on the date in
      question.

                  (q) "Warrant" shall have the meaning  assigned to such term in
      Section 4.2(f) hereof.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their  respective  authorize  officer as of this 24th day of
January, 2001.

                                          L.A.M. PHARMACEUTICAL CORP.

                                          By:
                                            ----------------------------------
                                            Alan Drizen, Chief Executive Officer

                                          Hockbury Limited

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

<PAGE>

                                                                EXHIBIT A

                          REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION  RIGHTS  AGREEMENT,  dated as of January 24, 2001 between
Hockbury Limited ("Purchaser") and L.A.M. Pharmaceutical Corp. (the "Company").

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement,  pursuant to a Common Stock Purchase  Agreement  dated as of the date
hereof (the "Purchase  Agreement") by and between the Purchaser and the Company,
the  Purchaser  has  committed to purchase up to  $20,000,000  of the  Company's
Common Stock (terms not defined herein shall have the meanings  ascribed to them
in the Purchase Agreement) and the Warrant; and

            WHEREAS,   the  Company  desires  to  grant  to  the  Purchaser  the
registration rights set forth herein with respect to the Shares.

            NOW, THEREFORE, the parties hereto mutually agree as follows:

     Section 1.  Registrable  Securities.  As used herein the term  "Registrable
Security"  means all Shares  that have not been (i) sold under the  Registration
Statement,  (ii) sold  under  circumstances  under  which all of the  applicable
conditions  of Rule 144 (or any  similar  provision  then in  force)  under  the
Securities Act ("Rule 144") are met, (iii) otherwise  transferred to persons who
may trade such Shares  without  restriction  under the  Securities  Act, and the
Company has delivered a new  certificate or other evidence of ownership for such
Shares not bearing a restrictive legend or (iv) sold without any time, volume or
manner  limitations  pursuant to Rule 144(k) (or any similar  provision  then in
effect) under the Securities Act. The term  "Registrable  Securities"  means any
and/or  all  of  the  Shares  falling  within  the  foregoing  definition  of  a
"Registrable   Security."   In  the   event  of  any   merger,   reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock,  such adjustment  shall be deemed to be made in the definition
of "Registrable  Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Agreement.

     Section  2.  Restrictions  on  Transfer.  The  Purchaser  acknowledges  and
understands  that  in  the  absence  of  an  effective   Registration  Statement
authorizing  the  resale of the  Shares  as  provided  herein,  the  Shares  are
"restricted  securities" as defined in Rule 144. The Purchaser  understands that
no disposition or transfer of the Shares may be made by Purchaser in the absence
of (i) an opinion of counsel to the Purchaser,  in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.

            With a view to making  available  to the  Purchaser  the benefits of
Rule 144, the Company agrees to:

(a)   comply with the provisions of paragraph (c)(1) of Rule 144; and

(b)   file  with the  Commission  in a  timely  manner  all  reports  and  other
      documents  required to be filed by the  Company  pursuant to Section 13 or

<PAGE>

      15(d) under the  Exchange  Act;  and, if at any time it is not required to
      file such  reports  but in the past had been  required to or did file such
      reports, it will, upon the request of the Purchaser,  make available other
      information  as required  by, and so long as necessary to permit sales of,
      its Registrable Securities pursuant to Rule 144.

     Section 3.  Registration Rights With Respect to the Shares.
                 ----------------------------------------------

(a)   The Company  agrees that it will prepare and file with the  Securities and
      Exchange Commission ("Commission"),  within forty-five (45) days after the
      date hereof,  a  registration  statement (on Form S-3 and/or S-1, or other
      appropriate form of registration  statement) under the Securities Act (the
      "Registration  Statement"),  at the sole expense of the Company (except as
      provided in Section 3(c) hereof), in respect of Purchaser, so as to permit
      a public  offering  and resale of the Shares under the  Securities  Act by
      Purchaser.

(b)   The Company shall use its best efforts to cause the Registration Statement
      to become effective within the earlier of (i) ninety (90) days of the date
      hereof,  or (ii)  five (5) days  after  receiving  written  notice  of SEC
      clearance  and will  within  said five (5) days  request  acceleration  of
      effectiveness.  The Company will notify Purchaser of the  effectiveness of
      the Registration Statement within one Trading Day of such event.

(c)  The Company will  maintain  the  Registration  Statement or  post-effective
     amendment filed under this Section 3 hereof  effective under the Securities
     Act  until  the  earliest  of (i) the date  that all the  Shares  have been
     disposed of pursuant to the Registration Statement,  (ii) the date that all
     of the Shares have been sold pursuant to the Registration Statement,  (iii)
     the date the holders  thereof receive an opinion of counsel to the Company,
     which  opinion shall be reasonably  acceptable to the  Purchaser,  that the
     Shares may be sold under the  provisions of Rule 144 without  limitation as
     to volume,  (iv) all Shares have been otherwise  transferred to persons who
     may trade such shares without restriction under the Securities Act, and the
     Company has delivered a new  certificate or other evidence of ownership for
     such Shares not bearing a restrictive legend, or (v) all Shares may be sold
     without any time, volume or manner  limitations  pursuant to Rule 144(k) or
     any  similar  provision  then in  effect  under the  Securities  Act in the
     opinion  of counsel  to the  Company,  which  counsel  shall be  reasonably
     acceptable to the Purchaser (the "Effectiveness Period").

(d)   All fees,  disbursements and out-of-pocket  expenses and costs incurred by
      the  Company  in  connection  with  the  preparation  and  filing  of  the
      Registration  Statement  under  subparagraph  3(a) and in  complying  with
      applicable  securities and Blue Sky laws (including,  without  limitation,
      all  attorneys'  fees of the Company)  shall be borne by the Company.  The
      Purchaser shall bear the cost of underwriting and/or brokerage  discounts,
      fees and  commissions,  if any,  applicable to the Shares being registered
      and the fees and expenses of its counsel.

(e)   The  Purchaser  and its counsel  shall have a  reasonable  period,  not to
      exceed  ten  (10)  Trading  Days,  to  review  the  proposed  Registration

<PAGE>

      Statement or any amendment  thereto,  prior to filing with the Commission,
      and the Company  shall  provide the  Purchaser  with copies of any comment
      letters  received from the Commission  with respect thereto within two (2)
      Trading Days of receipt thereof.

(f)  The Company shall make  reasonably  available for  inspection by Purchaser,
     any  underwriter   participating   in  any  disposition   pursuant  to  the
     Registration  Statement,  and  any  attorney,  accountant  or  other  agent
     retained by the Purchaser or any such  underwriter  all relevant  financial
     and other  records,  pertinent  corporate  documents and  properties of the
     Company and its subsidiaries,  and cause the Company's officers,  directors
     and  employees  to  supply  all  information  reasonably  requested  by the
     Purchaser  or any  such  underwriter,  attorney,  accountant  or  agent  in
     connection with the Registration  Statement,  in each case, as is customary
     for similar due diligence  examinations;  provided,  however,  all records,
     information and documents that are designated in writing by the Company, in
     good  faith,  as  confidential,  proprietary  or  containing  any  material
     non-public  information shall be kept confidential by the Purchaser and any
     such underwriter,  attorney, accountant or agent, unless such disclosure is
     made pursuant to judicial process in a court proceeding (after first giving
     the Company an opportunity promptly to seek a protective order or otherwise
     limit the scope of the  information  sought to be disclosed) or is required
     by law, or such records,  information or documents  become available to the
     public  generally  or  through  a  third  party  not  in  violation  of  an
     accompanying obligation of confidentiality. If the foregoing inspection and
     information  gathering would otherwise disrupt the Company's conduct of its
     business,  such inspection and information  gathering shall, to the maximum
     extent  possible,  be  coordinated on behalf of the Purchaser and the other
     parties  entitled  thereto by one firm of counsel designed by and on behalf
     of the majority in interest of Purchaser and other parties.

(g)   The Company shall qualify any of the Shares for sale in such states as the
      Purchaser reasonably  designates and shall furnish  indemnification in the
      manner  provided in Section 6 hereof.  However,  the Company  shall not be
      required  to  qualify in any state  which will  require an escrow or other
      restriction  relating to the  Company  and/or the  sellers,  or which will
      require the Company to qualify to do business in such state or require the
      Company to file therein any general consent to service of process.

(h)   The Company at its expense  will supply the  Purchaser  with copies of the
      Registration  Statement  and the  prospectus  included  therein  and other
      related documents in such quantities as may be reasonably requested by the
      Purchaser.

(i)  The  Company  shall  not  be  required  by  this  Section  3 to  include  a
     Purchaser's  Shares in any Registration  Statement which is to be filed if,
     in the  opinion of counsel  for both the  Purchaser  and the  Company  (or,
     should they not agree,  in the opinion of another  counsel  experienced  in
     securities  law matters  acceptable  to counsel for the  Purchaser  and the
     Company)  the  proposed  offering  or  other  transfer  as  to  which  such
     registration  is  requested  is exempt  from  applicable  federal and state
     securities laws and would result in all purchasers or transferees obtaining
     securities  which are not "restricted  securities",  as defined in Rule 144
     under the Securities Act.

<PAGE>

(j)  If at any  time  or  from  time to time  after  the  effective  date of the
     Registration  Statement,  the Company  notifies the Purchaser in writing of
     the  existence  of a Potential  Material  Event (as defined in Section 3(k)
     below),  the Purchaser  shall not offer or sell any Shares or engage in any
     other  transaction  involving  or relating to Shares,  from the time of the
     giving of notice  with  respect to a  Potential  Material  Event  until the
     Purchaser  receives  written  notice from the Company  that such  Potential
     Material  Event  either  has been  disclosed  to the  public  or no  longer
     constitutes  a  Potential   Material  Event  (the   "Suspension   Period").
     Notwithstanding  anything  herein to the contrary,  if a Suspension  Period
     occurs during any period  commencing on a Trading Day a Draw Down Notice is
     deemed  delivered and ending ten (10) Trading Days following the end of the
     corresponding  Draw Down Pricing  Period,  then the Company must compensate
     the  Purchaser  for any net  decline  in the  market  value  of any  Shares
     committed  to be  purchased  by the  Purchaser  through  the  end  of  such
     Suspension  Period.  Net  decline  shall be  calculated  as the  difference
     between the highest VWAP during the  applicable  Suspension  Period and the
     VWAP on the Trading Day immediately  following a properly  delivered notice
     to the  Purchaser  that such  Suspension  Period has ended.  If a Potential
     Material Event shall occur prior to the date the Registration  Statement is
     filed,  then the Company's  obligation to file the  Registration  Statement
     shall be delayed  without  penalty for not more than  thirty (30)  calendar
     days. The Company must give Purchaser notice in writing of the existence of
     a Potential  Material Event  immediately  upon knowledge that such an event
     exists and, where possible, at least two (2) days prior to the first day of
     a Suspension Period.

(k)  "Potential  Material Event" means any of the following:  (i) the possession
     by the Company of material information that is not ripe for disclosure in a
     registration  statement, as determined in good faith by the Chief Executive
     Officer or the Board of Directors of the Company or that disclosure of such
     information  in the  Registration  Statement  would be  detrimental  to the
     business and affairs of the Company;  or (ii) any  material  engagement  or
     activity by the Company which would, in the good faith determination of the
     Chief  Executive  Officer  or the Board of  Directors  of the  Company,  be
     adversely affected by disclosure in a registration  statement at such time,
     which  determination  shall be accompanied by a good faith determination by
     the Chief  Executive  Officer or the Board of Directors of the Company that
     the  Registration  Statement  would be  materially  misleading  absent  the
     inclusion of such information.

     Section 4. Cooperation with Company.  The Purchaser will cooperate with the
Company in all respects in  connection  with this  Agreement,  including  timely
supplying  all  information  reasonably  requested  by the Company  (which shall
include all  information  regarding the Purchaser and proposed manner of sale of
the  Registrable  Securities  required  to  be  disclosed  in  the  Registration
Statement)  and executing and  returning all documents  reasonably  requested in
connection  with the  registration  and sale of the  Registrable  Securities and
entering into and performing its obligations  under any underwriting  agreement,
if the offering is an underwritten  offering,  in usual and customary form, with
the managing  underwriter or underwriters  of such  underwritten  offering.  The
Purchaser  shall  consent  to be named  as an  underwriter  in the  Registration
Statement.  Purchaser  acknowledges  that in accordance with current  Commission

<PAGE>

policy,  the  Purchaser  will be named as the  underwriter  of the Shares in the
Registration Statement.

     Section 5. Registration Procedures. If and whenever the Company is required
by any of the provisions of this Agreement to effect the  registration of any of
the Registrable  Securities  under the Securities Act, the Company shall (except
as otherwise provided in this Agreement), as expeditiously as possible,  subject
to the Purchaser's assistance and cooperation as reasonably required:

(a)  prepare and file with the Commission such amendments and supplements to the
     Registration  Statement and the prospectus used in connection  therewith as
     may be  necessary  to keep such  registration  statement  effective  and to
     comply with the  provisions of the  Securities Act with respect to the sale
     or  other  disposition  of all  securities  covered  by  such  registration
     statement  whenever the  Purchaser  of such  Registrable  Securities  shall
     desire  to sell or  otherwise  dispose  of the same  (including  prospectus
     supplements  with respect to the sales of  securities  from time to time in
     connection with a registration  statement  pursuant to Rule 415 promulgated
     under the Securities Act) and (ii) take all lawful action such that each of
     (A) the Registration  Statement and any amendment thereto does not, when it
     becomes  effective,  contain an untrue statement of a material fact or omit
     to state a material fact required to be stated therein or necessary to make
     the statements  therein not misleading and (B) the prospectus  forming part
     of the  Registration  Statement,  and any amendment or supplement  thereto,
     does not at any time  during  the  Effectiveness  Period  include an untrue
     statement of a material  fact or omit to state a material  fact required to
     be stated therein or necessary to make the statements  therein, in light of
     the circumstances under which they were made, not misleading;

(b)  prior to the  filing  with the  Commission  of any  Registration  Statement
     (including any amendments  thereto) and the distribution or delivery of any
     prospectus  (including  any  supplements  thereto),  provide  draft  copies
     thereof to the Purchaser and reflect in such documents all such comments as
     the Purchaser (and its counsel)  reasonably may propose and (ii) furnish to
     the  Purchaser  such  numbers  of  copies  of  a  prospectus   including  a
     preliminary prospectus or any amendment or supplement to any prospectus, as
     applicable,  in conformity with the requirements of the Securities Act, and
     such other documents,  as the Purchaser may reasonably  request in order to
     facilitate the public sale or other  disposition of the securities owned by
     the Purchaser;

(c)  register and qualify the Registrable Securities covered by the Registration
     Statement  under New York blue sky laws  (subject  to the  limitations  set
     forth in  Section  3(g)  above),  and do any and all other  acts and things
     which may be  reasonably  necessary or advisable to enable the Purchaser to
     consummate the public sale or other disposition in such jurisdiction of the
     securities  owned by the  Purchaser,  except that the Company shall not for
     any such  purpose  be  required  to  qualify  to do  business  as a foreign
     corporation in any  jurisdiction  wherein it is not so qualified or to file
     therein any general consent to service of process;

<PAGE>

(d)   list such Registrable  Securities on the Principal  Market,  and any other
      exchange on which the Common Stock of the Company is then  listed,  if the
      listing of such  Registrable  Securities is then permitted under the rules
      of such exchange or the Nasdaq Stock Market;

(e)  notify the Purchaser at any time when a prospectus relating thereto covered
     by the  Registration  Statement  is  required  to be  delivered  under  the
     Securities  Act, of the happening of any event of which it has knowledge as
     a result of which the prospectus included in the Registration Statement, as
     then in effect, includes an untrue statement of a material fact or omits to
     state a material  fact  required to be stated  therein or necessary to make
     the  statements  therein not  misleading in the light of the  circumstances
     then existing,  and the Company shall prepare and file a curative amendment
     under Section 5(a) as quickly as commercially possible;

(f)   as promptly as practicable after becoming aware of such event,  notify the
      Purchaser who holds Registrable Securities being sold (or, in the event of
      an underwritten  offering,  the managing  underwriters) of the issuance by
      the  Commission  or  any  state  authority  of any  stop  order  or  other
      suspension  of the  effectiveness  of the  Registration  Statement  at the
      earliest   possible  time  and  take  all  lawful  action  to  effect  the
      withdrawal, recission or removal of such stop order or other suspension;

(g)   cooperate  with the Purchaser to  facilitate  the timely  preparation  and
      delivery of  certificates  for the  Registrable  Securities  to be offered
      pursuant to the  Registration  Statement and enable such  certificates for
      the Registrable  Securities to be in such denominations or amounts, as the
      case may be, as the  Purchaser  reasonably  may request and  registered in
      such  names  as the  Purchaser  may  request,  pursuant  to  the  Purchase
      Agreement.

(h)   take all such other lawful  actions  reasonably  necessary to expedite and
      facilitate the disposition by the Purchaser of its Registrable  Securities
      in  accordance  with  the  intended  methods  therefor   provided  in  the
      prospectus   which  are   customary  for  issuers  to  perform  under  the
      circumstances;

(i)   in the event of an underwritten offering,  promptly include or incorporate
      in a prospectus supplement or post-effective amendment to the Registration
      Statement such information as the managing  underwriters  reasonably agree
      should be included  therein and to which the Company  does not  reasonably
      object and make all  required  filings of such  prospectus  supplement  or
      post-effective  amendment as soon as  practicable  after it is notified of
      the matters to be included or incorporated  in such prospectus  supplement
      or post-effective amendment; and

(j)   maintain a transfer agent for its Common Stock.

<PAGE>

     Section 6.  Indemnification.
     ---------------------------

(a)  The Company  agrees to indemnify  and hold  harmless the Purchaser and each
     person,  if any,  who  controls  the  Purchaser  within the  meaning of the
     Securities  Act  ("Distributing  Purchaser")  against any  losses,  claims,
     damages or liabilities,  joint or several (which shall, for all purposes of
     this  Agreement,  include,  but not be limited to, all reasonable  costs of
     defense and investigation and all reasonable attorneys' fees), to which the
     Distributing  Purchaser may become  subject,  under the  Securities  Act or
     otherwise,  insofar as such  losses,  claims,  damages or  liabilities  (or
     actions  in  respect  thereof)  arise out of or are based  upon any  untrue
     statement or alleged untrue statement of any material fact contained in the
     Registration  Statement,  or  any  related  preliminary  prospectus,  final
     prospectus or amendment or supplement thereto, or arise out of or are based
     upon the  omission  or alleged  omission to state  therein a material  fact
     required to be stated therein or necessary to make the  statements  therein
     not misleading;  provided,  however, that the Company will not be liable in
     any such case to the extent that any such loss, claim,  damage or liability
     arises  out of or is based  upon an  untrue  statement  or  alleged  untrue
     statement  or  omission  or  alleged  omission  made  in  the  Registration
     Statement,   preliminary  prospectus,  final  prospectus  or  amendment  or
     supplement  thereto in  reliance  upon,  and in  conformity  with,  written
     information  furnished  to  the  Company  by  the  Distributing   Purchaser
     specifically  for use in the preparation  thereof.  This Section 6(a) shall
     not inure to the benefit of any Distributing  Purchaser with respect to any
     person  asserting such loss,  claim,  damage or liability who purchased the
     Registrable  Securities  which are the subject thereof if the  Distributing
     Purchaser failed to send or give (in violation of the Securities Act or the
     rules and  regulations  promulgated  thereunder)  a copy of the  prospectus
     contained in such Registration  Statement to such person at or prior to the
     written  confirmation  to such  person  of the  sale  of  such  Registrable
     Securities,  where the Distributing  Purchaser was obligated to do so under
     the Securities  Act or the rules and  regulations  promulgated  thereunder.
     This  indemnity  agreement  will be in addition to any liability  which the
     Company may otherwise have.

(b)  Each Distributing Purchaser agrees that it will indemnify and hold harmless
     the Company,  and each officer,  director of the Company or person, if any,
     who controls the Company within the meaning of the Securities Act,  against
     any losses,  claims,  damages or liabilities (which shall, for all purposes
     of this Agreement,  include, but not be limited to, all reasonable costs of
     defense and investigation and all reasonable  attorneys' fees) to which the
     Company or any such  officer,  director  or  controlling  person may become
     subject  under the  Securities  Act or  otherwise,  insofar as such losses,
     claims, damages or liabilities (or actions in respect thereof) arise out of
     or are based upon any untrue  statement or alleged untrue  statement of any
     material  fact  contained  in the  Registration  Statement,  or any related
     preliminary  prospectus,   final  prospectus  or  amendment  or  supplement
     thereto,  or arise out of or are based  upon the  omission  or the  alleged
     omission to state therein a material fact required to be stated  therein or
     necessary to make the statements  therein not misleading,  but in each case
     only to the extent that such untrue  statement or alleged untrue  statement
     or omission or alleged  omission  was made in the  Registration  Statement,

<PAGE>

     preliminary prospectus, final prospectus or amendment or supplement thereto
     in reliance upon, and in conformity with, written information  furnished to
     the  Company by such  Distributing  Purchaser  specifically  for use in the
     preparation  thereof.  This indemnity  agreement will be in addition to any
     liability   which  the   Distributing   Purchaser   may   otherwise   have.
     Notwithstanding anything to the contrary herein, the Distributing Purchaser
     shall not be liable under this Section 6(b) for any amount in excess of the
     net  proceeds  to such  Distributing  Purchaser  as a result of the sale of
     Registrable Securities pursuant to the Registration Statement.

(c)  Promptly  after  receipt by an  indemnified  party under this  Section 6 of
     notice of the commencement of any action, such indemnified party will, if a
     claim in respect thereof is to be made against the indemnifying party under
     this Section 6, notify the indemnifying party of the commencement  thereof;
     but the omission so to notify the  indemnifying  party will not relieve the
     indemnifying  party from any liability which it may have to any indemnified
     party  except  to  the  extent  of  actual  prejudice  demonstrated  by the
     indemnifying  party.  In case  any  such  action  is  brought  against  any
     indemnified   party,  and  it  notifies  the  indemnifying   party  of  the
     commencement   thereof,   the  indemnifying   party  will  be  entitled  to
     participate in, and, to the extent that it may wish, jointly with any other
     indemnifying party similarly notified,  assume the defense thereof, subject
     to the  provisions  herein  stated and after  notice from the  indemnifying
     party to such  indemnified  party of its  election so to assume the defense
     thereof,  the  indemnifying  party  will not be liable to such  indemnified
     party  under this  Section 6 for any legal or other  expenses  subsequently
     incurred by such  indemnified  party in connection with the defense thereof
     other than reasonable costs of investigation, unless the indemnifying party
     shall not pursue the action to its final conclusion.  The indemnified party
     shall have the right to employ  separate  counsel in any such action and to
     participate  in the  defense  thereof,  but the fees and  expenses  of such
     counsel  shall  not be at the  expense  of the  indemnifying  party  if the
     indemnifying  party has  assumed  the  defense of the action  with  counsel
     reasonably  satisfactory  to the  indemnified  party;  provided that if the
     indemnified party is the Distributing  Purchaser,  the fees and expenses of
     such counsel shall be at the expense of the  indemnifying  party if (i) the
     employment of such counsel has been  specifically  authorized in writing by
     the  indemnifying  party,  or (ii) the  named  parties  to any such  action
     (including any impleaded  parties) include both the Distributing  Purchaser
     and the indemnifying  party and the Distributing  Purchaser shall have been
     advised  by such  counsel  that  there  may be one or more  legal  defenses
     available to the indemnifying  party different from or in conflict with any
     legal  defenses  which may be available to the  Distributing  Purchaser (in
     which case the  indemnifying  party  shall not have the right to assume the
     defense of such action on behalf of the  Distributing  Purchaser,  it being
     understood,  however, that the indemnifying party shall, in connection with
     any one such  action or  separate  but  substantially  similar  or  related
     actions  in  the  same  jurisdiction   arising  out  of  the  same  general
     allegations or  circumstances,  be liable only for the reasonable  fees and
     expenses of one separate firm of attorneys for the Distributing  Purchaser,
     which firm shall be designated in writing by the Distributing Purchaser and
     be approved by the indemnifying party). No settlement of any action against

<PAGE>

     an indemnified party shall be made without the prior written consent of the
     indemnified party, which consent shall not be unreasonably withheld.

                  All fees and  expenses  of the  indemnified  party  (including
      reasonable costs of defense and investigation in a manner not inconsistent
      with this Section and all reasonable  attorneys'  fees and expenses) shall
      be paid to the  indemnified  party,  as incurred,  within ten (10) Trading
      Days of written notice thereof to the indemnifying party;  provided,  that
      the indemnifying  party may require such indemnified party to undertake to
      reimburse  all  such  fees  and  expenses  to  the  extent  it is  finally
      judicially  determined  that such  indemnified  party is not  entitled  to
      indemnification hereunder.

     Section  7.  Contribution.  In order  to  provide  for  just and  equitable
contribution  under the Securities Act in any case in which (i) the  indemnified
party  makes a claim for  indemnification  pursuant  to  Section 6 hereof but is
judicially  determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for  indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified  party,  then the Company and the
applicable  Distributing  Purchaser  shall  contribute to the aggregate  losses,
claims,  damages or liabilities  to which they may be subject (which shall,  for
all purposes of this Agreement,  include,  but not be limited to, all reasonable
costs of defense and  investigation  and all  reasonable  attorneys'  fees),  in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to  information  supplied by the Company on the one hand
or the  applicable  Distributing  Purchaser on the other hand,  and the parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission.  The Company and the Distributing  Purchaser
agree that it would not be just and equitable if  contribution  pursuant to this
Section 7 were  determined  by pro rata  allocation  or by any  other  method of
allocation which does not take account of the equitable  considerations referred
to in this  Section 7. The amount paid or payable by an  indemnified  party as a
result of the  losses,  claims,  damages or  liabilities  (or actions in respect
thereof)  referred  to above in this  Section 7 shall be deemed to  include  any
legal  or  other  expenses  reasonably  incurred  by such  indemnified  party in
connection with  investigating  or defending any such action or claim. No person
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the Securities  Act) shall be entitled to  contribution  from any person who was
not guilty of such fraudulent misrepresentation.

            Notwithstanding  any other  provision of this Section 7, in no event
shall any (i)  Purchaser be required to undertake  liability to any person under
this  Section  7 for any  amounts  in  excess  of the  dollar  amount of the net
proceeds  to be  received  by the  Purchaser  from the  sale of the  Purchaser's
Registrable  Securities  (after  deducting any fees,  discounts and  commissions
applicable  thereto)  pursuant to any  Registration  Statement  under which such
Registrable  Securities  are to be registered  under the Securities Act and (ii)
underwriter be required to undertake  liability to any person  hereunder for any
amounts in excess of the aggregate  discount,  commission or other  compensation

<PAGE>

payable  to  such  underwriter  with  respect  to  the  Registrable   Securities
underwritten by it and distributed pursuant to the Registration Statement.

     Section 8. Notices. All notices, demands,  requests,  consents,  approvals,
and other  communications  required or permitted  hereunder  shall be in writing
and, unless otherwise  specified herein,  shall be delivered as set forth in the
Purchase Agreement.

     Section  9.  Assignment.  Neither  this  Agreement  nor any  rights  of the
Purchaser or the Company  hereunder may be assigned by either party to any other
person.  Notwithstanding  the  foregoing,  (a) the  provisions of this Agreement
shall inure to the benefit of, and be  enforceable  by, any transferee of any of
the Common Stock purchased by the Purchaser  pursuant to the Purchase  Agreement
other than through  open-market sales, and (b) upon the prior written consent of
the Company,  which consent shall not be unreasonably withheld or delayed in the
case of an assignment to an affiliate of the Purchaser, the Purchaser's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity  (including  any affiliate of the  Purchaser)  who agrees to be
bound hereby.

     Section 10.  Counterparts/Facsimile.  This Agreement may be executed in two
or more  counterparts,  each of which shall  constitute an original,  but all of
which, when together shall constitute but one and the same instrument, and shall
become  effective when one or more  counterparts  have been signed by each party
hereto and delivered to the other party.  In lieu of the  original,  a facsimile
transmission  or copy of the original  shall be as effective and  enforceable as
the original.

     Section  11.  Remedies  and  Severability.  The  remedies  provided in this
Agreement are cumulative  and not exclusive of any remedies  provided by law. If
any term,  provision,  covenant or  restriction  of this  Agreement is held by a
court of competent  jurisdiction to be invalid,  illegal, void or unenforceable,
the remainder of the terms,  provisions,  covenants and  restrictions  set forth
herein  shall  remain in full force and effect and shall in no way be  affected,
impaired or invalidated,  and the parties hereto shall use their best efforts to
find and employ an alternative  means to achieve the same or  substantially  the
same  result  as  that  contemplated  by  such  term,  provision,   covenant  or
restriction.  It is hereby  stipulated  and declared to be the  intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions  without including any of those that may be hereafter  declared
invalid, illegal, void or unenforceable.

     Section 12.  Conflicting  Agreements.  The Company shall not enter into any
agreement with respect to its securities  that is  inconsistent  with the rights
granted  to the  purchasers  of  Registrable  Securities  in this  Agreement  or
otherwise  prevents  the  Company  from  complying  with all of its  obligations
hereunder.

     Section 13.  Headings.  The headings in this  Agreement  are for  reference
purposes only and shall not affect in any way the meaning or  interpretation  of
this Agreement.

     Section  14.  Governing  Law.  This  Agreement  shall  be  governed  by and
construed in  accordance  with the laws of the State of New York  applicable  to

<PAGE>

contracts  made in New York by persons  domiciled  in New York City and  without
regard to its  principles of conflicts of laws. Any action may be brought as set
forth in the Purchase  Agreement.  The Company and the Purchaser agree to submit
themselves  to the in  personam  jurisdiction  of the state and  federal  courts
situated  within the  Southern  District of the State of New York with regard to
any controversy  arising out of or relating to this  Agreement.  Any party shall
have  the  right  to  seek  injunctive   relief  from  any  court  of  competent
jurisdiction in any case where such relief is available.  Any dispute under this
Agreement  shall be submitted  to  arbitration  under the  American  Arbitration
Association  (the  "AAA") in New York City,  New York,  and shall be finally and
conclusively  determined by the decision of a board of arbitration consisting of
three (3)  members  (hereinafter  referred  to as the  "Board  of  Arbitration")
selected as according to the rules  governing the AAA. The Board of  Arbitration
shall meet on  consecutive  business days in New York City,  New York, and shall
reach and  render a  decision  in writing  (concurred  in by a  majority  of the
members of the Board of Arbitration)  with respect to the amount,  if any, which
the losing  party is  required  to pay to the other  party in respect of a claim
filed.  In connection  with  rendering its  decisions,  the Board of Arbitration
shall  adopt  and  follow  the laws of the  State  of New  York.  To the  extent
practical,  decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following  commencement  of  proceedings  with respect
thereto.  The Board of  Arbitration  shall  cause  its  written  decision  to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be  authorized  and is  directed to enter a default  judgment  against any party
refusing to participate in the arbitration  proceeding within thirty days of any
deadline for such  participation.  Any decision made by the Board of Arbitration
(either  prior to or after the  expiration  of such  thirty  (30)  calendar  day
period)  shall be final,  binding and  conclusive on the parties to the dispute,
and entitled to be enforced to the fullest  extent  permitted by law and entered
in any court of competent  jurisdiction.  The prevailing  party shall be awarded
its costs,  including  attorneys' fees, from the non-prevailing party as part of
the arbitration  award. Any party shall have the right to seek injunctive relief
from any  court of  competent  jurisdiction  in any case  where  such  relief is
available.  The prevailing party in such injunctive  action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on this 24th day of January, 2001

                                     L.A.M. PHARMACEUTICAL CORP.

                                     By:
                                         -------------------------------
                                         Alan Drizen, Chief Executive Officer

                                     Hockbury Limited

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

<PAGE>

                                   EXHIBIT B

                                ESCROW AGREEMENT

            THIS ESCROW  AGREEMENT (this  "Agreement") is made as of January 24,
2001, by and among L.A.M. Pharmaceutical Corp., a corporation incorporated under
the laws of  Delaware  (the  "Company"),  Hockbury  Limited  ("Purchaser"),  and
Epstein Becker & Green, P.C., having an address at 250 Park Avenue, New York, NY
10177 (the "Escrow Agent").  Capitalized terms used but not defined herein shall
have the meanings set forth in the Common Stock Purchase  Agreement  referred to
in the first recital.

            WHEREAS,  the  Purchaser  will from time to time as requested by the
Company,  purchase shares of the Company's  Common Stock from the Company as set
forth in that certain Common Stock Purchase Agreement (the "Purchase Agreement")
dated the date hereof between the Purchaser and the Company,  which shares shall
be issued  pursuant  to the terms and  conditions  contained  herein  and in the
Purchase Agreement; and

            WHEREAS,  the  Company and the  Purchaser  have  requested  that the
Escrow  Agent hold in escrow  and then  distribute  the  initial  documents  and
certain  funds  which  are  conditions  precedent  to the  effectiveness  of the
Purchase Agreement, and have further requested that upon each exercise of a Draw
Down, the Escrow Agent hold the relevant  documents and the applicable  purchase
price  pending  receipt by Purchaser of the  securities  issuable upon such Draw
Down;

            NOW,  THEREFORE,  in  consideration  of  the  covenants  and  mutual
promises contained herein and other good and valuable consideration, the receipt
and legal  sufficiency  of which are hereby  acknowledged  and  intending  to be
legally bound hereby, the parties agree as follows:

                                   Article I
                   TERMS OF THE ESCROW FOR THE INITIAL CLOSING

     1.1.  The parties  hereby  agree to  establish  an escrow  account with the
Escrow Agent whereby the Escrow Agent shall hold the funds and  documents  which
are referenced in Section 5.2 of the Purchase Agreement.

     1.2. At the Initial Closing, the Company shall deliver to the Escrow Agent:

(i)  the original executed  Registration Rights Agreement in the form of Exhibit
     A to the Purchase Agreement;

(ii) the  original  executed  opinion  of Hart & Trinen,  L.L.P.  in the form of
     Exhibit C to the Purchase Agreement;

(iii) the sum of $25,000;

(iv)  the original executed Company counterpart of this Escrow Agreement;

<PAGE>

(v)   the original executed Company counterpart of the Purchase Agreement; and

(vi)  the original executed Warrant.

     1.3. Upon receipt of the  foregoing,  and receipt of executed  counterparts
from Purchaser of the Purchase Agreement,  the Registration Rights Agreement and
this  Escrow  Agreement,   the  Escrow  Agent  shall  calculate  and  enter,  if
applicable,  the number,  exercise price,  issuance date and termination date on
the face of the Warrant and immediately  transfer the sum of $25,000 to Epstein,
Becker & Green,  P.C. for the  Purchaser's  legal and escrow  expenses and shall
then  arrange  to have  the  Purchase  Agreement,  this  Escrow  Agreement,  the
Registration Rights Agreement,  the Warrant and the opinion of counsel delivered
to the appropriate parties.

     1.4 Wire  transfers to the Escrow Agent (not address for notice or delivery
of documents) shall be made as follows:

                        Epstein Becker & Green, P.C.
                        Master Escrow Account
                        Chase Manhattan Bank
                        1411 Broadway - Fifth Floor
                        New York, New York 10018
                        ABA No. 021000021
                        Account No. 035 1 346036
                        Attention: L. Borneo

                                   Article II
                     TERMS OF THE ESCROW FOR EACH DRAW DOWN

     2.1.  Each time the Company  shall send a Draw Down Notice to the Purchaser
as provided in the Purchase  Agreement,  it shall send a copy, by facsimile,  to
the Escrow Agent.

     2.2. Each time the Purchaser shall purchase Shares pursuant to a Draw Down,
the Purchaser  shall send the applicable  Purchase Price of the Draw Down Shares
to the Escrow Agent.  Upon receipt of such funds,  the Escrow Agent shall advise
the  Company  that it has  received  the funds for such  Draw Down  Shares.  The
Company shall  promptly,  but no later than one (1) Trading Day after receipt of
such funding notice from the Escrow Agent:

(i)  cause its transfer agent to issue the Draw Down Shares to the Purchaser via
     DTC's DWAC system to the account  specified by the  Purchaser  from time to
     time;

(ii) deliver the original executed  attorney's  opinion in the form of Exhibit C
     to the Purchase Agreement to the Purchaser; and

(iii) deliver a Form 424(b)(3) supplemental prospectus to the Purchaser.

<PAGE>

     2.3. Upon receipt of written  confirmation  from the transfer agent or from
the Purchaser  that such Draw Down Shares have been so deposited and the opinion
and the supplemental prospectus have been so delivered,  the Escrow Agent shall,
within one (1)  Trading  Day,  wire 93% of the  Purchase  Price of the Draw Down
Shares per the  written  instructions  of the  Company,  net of $1,000 as escrow
expenses to the Escrow Agent and the remaining 7% as directed by GKN  Securities
Corp.

     2.4. In the event that the Draw Down Shares are not in the  Purchaser's DTC
account and the opinion and  supplemental  prospectus  are not  delivered to the
Escrow  Agent  within one (1)  Trading  Days of the date of the  Escrow  Agent's
notice,  then Purchaser shall have the right to demand, by notice, the return of
the Purchase Price, and the Draw Down Notice shall be deemed cancelled.

                                   Article III
                                  MISCELLANEOUS

     3.1. No waiver or any breach of any covenant or provision  herein contained
shall be deemed a waiver of any preceding or succeeding  breach  thereof,  or of
any other  covenant or  provision  herein  contained.  No  extension of time for
performance  of any  obligation  or act shall be deemed an extension of the time
for performance of any other obligation or act.

     3.2. All notices or other  communications  required or permitted  hereunder
shall be in writing, and shall be sent by fax, overnight courier,  registered or
certified mail, postage prepaid,  return receipt requested,  and shall be deemed
received upon receipt thereof, as set forth in the Purchase Agreement.

     3.3.  This Escrow  Agreement  shall be binding  upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.

     3.4.  This Escrow  Agreement is the final  expression  of, and contains the
entire agreement between,  the parties with respect to the subject matter hereof
and  supersedes  all prior  understandings  with  respect  thereto.  This Escrow
Agreement may not be modified, changed,  supplemented or terminated, nor may any
obligations  hereunder  be waived,  except by written  instrument  signed by the
parties to be charged or by their  respective  agents duly authorized in writing
or as otherwise expressly permitted herein.

     3.5.  Whenever  required  by the  context  of this  Escrow  Agreement,  the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties,  but rather as if both parties had prepared the same.  Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.

     3.6. The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Except as expressly set forth herein,  any action
to enforce,  arising out of, or relating in any way to, any  provisions  of this
Escrow  Agreement  shall be brought in the Federal or state  courts of New York,
New York as is more fully set forth in the Purchase Agreement.

<PAGE>

     3.7. The Escrow Agent's duties hereunder may be altered,  amended, modified
or revoked  only by a writing  signed by the Company,  Purchaser  and the Escrow
Agent.

     3.8. The Escrow Agent shall be obligated  only for the  performance of such
duties as are  specifically set forth herein and may rely and shall be protected
in relying or refraining  from acting on any instrument  reasonably  believed by
the  Escrow  Agent to be genuine  and to have been  signed or  presented  by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow  Agent may do or omit to do  hereunder  as the Escrow Agent while
acting  in good  faith,  excepting  only its own  gross  negligence  or  willful
misconduct,  and any act done or  omitted by the Escrow  Agent  pursuant  to the
advice of the Escrow Agent's  attorneys-at-law  (other than Escrow Agent itself)
shall be conclusive evidence of such good faith.

     3.9. The Escrow Agent is hereby  expressly  authorized to disregard any and
all  warnings  given by any of the  parties  hereto  or by any  other  person or
corporation,  excepting  only  orders or  process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order,  judgment
or decree,  the Escrow Agent shall not be liable to any of the parties hereto or
to any  other  person,  firm or  corporation  by  reason  of such  decree  being
subsequently reversed,  modified,  annulled, set aside, vacated or found to have
been entered without jurisdiction.

     3.10. The Escrow Agent shall not be liable in any respect on account of the
identity,  authorization  or rights of the parties  executing or  delivering  or
purporting  to execute or deliver the  Purchase  Agreement  or any  documents or
papers deposited or called for thereunder or hereunder.

     3.11.  The Escrow Agent shall be entitled to employ such legal  counsel and
other  experts as the Escrow  Agent may deem  necessary  properly  to advise the
Escrow Agent in connection  with the Escrow Agent's duties  hereunder,  may rely
upon  the  advice  of  such  counsel,   and  may  pay  such  counsel  reasonable
compensation  therefor.  The  Escrow  Agent has acted as legal  counsel  for the
Purchaser, and may continue to act as legal counsel for the Purchaser, from time
to time,  notwithstanding its duties as the Escrow Agent hereunder.  The Company
consents to the Escrow Agent in such capacity as legal counsel for the Purchaser
and waives any claim that such representation  represents a conflict of interest
on the part of the Escrow Agent. The Company  understands that the Purchaser and
the Escrow Agent are relying  explicitly on the foregoing  provision in entering
into this Escrow Agreement.

     3.12. The Escrow Agent's  responsibilities  as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written  notice to the Company and
the  Purchaser.  In the event of any such  resignation,  the  Purchaser  and the
Company shall appoint a successor Escrow Agent.

<PAGE>

     3.13. If the Escrow Agent reasonably  requires other or further instruments
in connection with this Escrow  Agreement or obligations in respect hereto,  the
necessary parties hereto shall join in furnishing such instruments.

     3.14.  It is  understood  and agreed  that  should any  dispute  arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow  funds held by the Escrow  Agent  hereunder,  the Escrow  Agent is
authorized and directed in the Escrow  Agent's sole  discretion (1) to retain in
the Escrow  Agent's  possession  without  liability to anyone all or any part of
said  documents or the escrow funds until such disputes  shall have been settled
either by mutual  written  agreement of the parties  concerned by a final order,
decree  or  judgment  of a court of  competent  jurisdiction  after the time for
appeal has expired and no appeal has been perfected,  but the Escrow Agent shall
be under no duty  whatsoever to institute or defend any such  proceedings or (2)
to deliver the escrow  funds and any other  property and  documents  held by the
Escrow Agent  hereunder to a state or Federal  court  having  competent  subject
matter  jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.

     3.15.  The  Company  and the  Purchaser  agree  jointly  and  severally  to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims,  liabilities,  costs or expenses in
any way  arising  from or relating  to the duties or  performance  of the Escrow
Agent  hereunder  or the  transactions  contemplated  hereby or by the  Purchase
Agreement  other  than (i) any such  claim,  liability,  cost or  expense to the
extent the same shall have been determined by final,  unappealable judgment of a
court of competent  jurisdiction  to have resulted from the gross  negligence or
willful  misconduct of the Escrow Agent,  or (ii) costs or expenses  relating to
services  for which the  Escrow  Agent has or will be  compensated  pursuant  to
Article I of this Agreement.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of
this 24th day of January, 2001.

                                       L.A.M. PHARMACEUTICAL CORP.

                                        By:_________________________________
                                           Alan Drizen, Chief Executive Officer

                                          HOCKBURY LIMITED

                                          By: ______________________________
                                               Name:
                                               Title:

                                     ESCROW AGENT:

                                     EPSTEIN BECKER & GREEN, P.C.

                                    By:__________________________
                                        Robert F. Charron, Authorized Signatory

<PAGE>

                                    EXHIBIT C

              FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL

                                     [DATE]

[PURCHASER]

Re:  Common   Stock   Purchase   Agreement   Between   [PURCHASER]   and  L.A.M.
     Pharmaceutical Corp.

Ladies and Gentlemen:

            This  opinion is  furnished  to you  pursuant  to the  Common  Stock
Purchase  Agreement  by and between  [PURCHASER]  (the  "Purchaser")  and L.A.M.
Pharmaceutical  Corp.  (the  "Company"),  dated  as of  January  __,  2001  (the
"Purchase  Agreement"),  which provides for the issuance and sale by the Company
of up to  $10,000,000  of Common  Stock (the  "Shares")  of the  Company and the
Warrant.  All  terms  used  herein  have the  meanings  defined  for them in the
Purchase Agreement unless otherwise defined herein.

            We have acted as counsel  for the  Company  in  connection  with the
negotiation of the Purchase Agreement,  the Warrant issued by the Company at the
Closing,  the  Registration  Rights  Agreement  between  the  Purchaser  and the
Company, dated as of January __, 2001 (the "Registration Rights Agreement"), and
the Escrow  Agreement  between the  Purchaser,  the Company and Epstein Becker &
Green, P.C., dated as of January __, 2001 (the "Escrow Agreement",  and together
with the Purchase Agreement,  the Warrant and the Registration Rights Agreement,
the "Agreements").  As counsel, we have made such legal and factual examinations
and  inquiries  as we have  deemed  advisable  or  necessary  for the purpose of
rendering  this  opinion.  In addition,  we have  examined,  among other things,
originals or copies of such corporate  records of the Company,  certificates  of
public  officials and such other documents and questions of law that we consider
necessary  or  advisable  for the purpose of  rendering  this  opinion.  In such
examination  we have  assumed  the  genuineness  of all  signatures  on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
copies thereof, the legal capacity of natural persons, and the due execution and
delivery  of all  documents  (except as to due  execution  and  delivery  by the
Company)   where  due  execution  and  delivery  are  a   prerequisite   to  the
effectiveness thereof.

            As used in this opinion, the expression "to our knowledge" refers to
the current  actual  knowledge of the  attorneys of this firm who have worked on
matters  for the  Company  solely  in  connection  with the  Agreements  and the
transactions contemplated thereby.

            For purposes of this opinion, we have assumed that the Purchaser has
all requisite power and authority, and has taken any and all necessary corporate
action,  to execute and deliver the  Agreements,  and we are  assuming  that the
representations  and  warranties  made by the  Purchaser in the  Agreements  and
pursuant thereto are true and correct.

<PAGE>

            Based upon and subject to the foregoing, we are of the opinion that:

     1. The Company is a corporation  duly  organized,  validly  existing and in
good  standing  under the laws of the State of  Delaware  and has all  requisite
power and authority  (corporate  and other) to carry on its business and to own,
lease and operate its  properties  and assets as described in the  Company's SEC
Documents.  The  Company  and each  subsidiary  is duly  qualified  as a foreign
corporation  to do business  and is in good  standing in every  jurisdiction  in
which the Company owns or leases property, other than those in which the failure
so to qualify would not have a Material Adverse Effect.

     2. The Company has the  requisite  corporate  power and  authority to enter
into and perform its  obligations  under the Agreements and to issue the Shares.
The execution and delivery of the Agreements by the Company and the consummation
by it of the transactions  contemplated thereby have been duly authorized by all
necessary  corporate  action and no  further  consent  or  authorization  of the
Company or its Board of  Directors  or  stockholders  is  required.  Each of the
Agreements  has been duly  executed and delivered by the Company and each of the
Agreements  constitutes valid and binding obligations of the Company enforceable
against the Company in accordance with their  respective  terms,  except as such
enforceability may be limited by applicable bankruptcy,  insolvency,  or similar
laws relating to, or affecting  generally the  enforcement of creditors'  rights
and remedies or by other equitable principles of general application.

     3. The execution, delivery and performance of the Agreements by the Company
and the  consummation by the Company of the transactions  contemplated  thereby,
including,  without limitation,  the issuance of the Shares, the Warrant and the
shares issuable upon exercise of the Warrant (the "Warrant Shares"),  do not and
will not (i) result in a violation of the  Company's  Charter (the  "Charter) or
By-Laws; (ii) to our knowledge,  conflict with, or constitute a material default
(or an event that with  notice or lapse of time or both would  become a default)
under, or give to others any rights of termination,  amendment,  acceleration or
cancellation of, any material agreement,  indenture, instrument or any "lock-up"
or similar  provision  of any  underwriting  or similar  agreement  to which the
Company is a party;  or (iii) result in a violation of any federal or state law,
rule or  regulation  applicable to the Company or by which any property or asset
of the Company is bound or affected,  except for such  violations  as would not,
individually  or in  the  aggregate,  have a  Material  Adverse  Effect.  To our
knowledge,  the  Company  is not in  violation  of any terms of its  Charter  or
Bylaws.

     4. When issued and paid for, the Shares and Warrant Shares will be duly and
validly  issued,   fully  paid  and  nonassessable,   and  free  of  any  liens,
encumbrances and preemptive or similar rights contained in the Company's Charter
or Bylaws or, to our knowledge, in any agreement to which the Company is party.

     5. To our knowledge, except as disclosed in the SEC Documents, there are no
claims, actions,  suits,  proceedings or investigations that are pending against
the Company or its properties, or against any officer or director of the Company
in his or her capacity as such, nor has the Company  received any written threat
of any such claims, actions, suits, proceedings, or investigations.

<PAGE>

     6. To our knowledge,  there are no outstanding options,  warrants, calls or
commitments of any character  whatsoever  relating to, or securities,  rights or
obligations  convertible  into or  exchangeable  for,  or  giving  any  right to
subscribe for or acquire any shares of Common Stock or  contracts,  commitments,
understanding,  or  arrangements  by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights  convertible or
exchangeable  into  shares  of Common  Stock,  except  as  described  in the SEC
Documents or the Agreements.  To our knowledge, the Company is not a party to or
subject to the provisions of any order, writ, injunction,  judgment or decree of
any court or government agency or instrumentality.

     7. The  issuance of the Shares and the Warrant  Shares will not violate the
applicable listing agreement between the Company and any securities  exchange or
market on which the Company's securities are listed.

     8. The  authorized  capital  stock of the Company  consists  of  50,000,000
shares of Common Stock,  $0.0001 par value per share, of which 11,342,500 shares
are issued and outstanding and no shares of preferred stock.

     9. [The Registration  Statement has been declared  effective by the SEC and
no stop order is in effect with respect to the Registration Statement.  Assuming
compliance  by the  Purchaser  with the "Plan of  Distribution"  caption  of the
Registration   Statement  and  timely  compliance  by  the  Purchaser  with  all
prospectus  delivery  requirements,  the Shares shall be freely  transferable by
Purchaser.

     10.  Nothing has come to our  attention  that has caused us to believe that
the  Registration  Statement  and the  Prospectus  at the time the  Registration
Statement  became  effective  and as of the date of this  opinion  contained  or
contains an untrue  statement of a material  fact or omitted or omits to state a
material fact required to be stated  therein or necessary to make the statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading;  however,  we  express  no opinion  with  respect  to the  financial
statements  and the notes  thereto and the  schedules  and other  financial  and
statistical data derived therefrom included in the Registration Statement or the
Prospectus.]  [Items 9 and 10 to be included in Opinion  pursuant to Section 4.3
at each Draw Down.]

            This opinion is furnished to the Purchaser solely for its benefit in
connection with the  transactions  described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.

<PAGE>

                                    EXHIBIT D

                     DRAW DOWN NOTICE/COMPLIANCE CERTIFICATE

                           L.A.M. Pharmaceutical Corp.

            The undersigned  hereby certifies,  with respect to shares of Common
Stock of L.A.M. Pharmaceutical Corp. (the "Company") issuable in connection with
this Draw Down  Notice  and  Compliance  Certificate  dated  _____________  (the
"Notice"), delivered pursuant to the Common Stock Purchase Agreement dated as of
January 24, 2001 (the "Agreement"), as follows:

     1. The  undersigned is the duly appointed  Chief  Executive  Officer of the
Company.

     2.   Except  as  set  forth  on  the   schedules   attached   hereto,   the
representations  and  warranties  of the Company set forth in the  Agreement are
true and correct in all  material  respects as though made on and as of the date
hereof  and all SEC  Documents  are as  represented  in  Section  3.1(f)  of the
Agreement.

     3. The Company has  performed in all material  respects all  covenants  and
agreements to be performed by the Company under the Agreement on or prior to the
date of this Draw Down Notice and has complied in all material respects with all
of the Company's obligations and conditions contained in the Agreement.

     4. The Investment Amount is $___________.

     5. The Threshold Price, if any, is $__________.

     6. The Draw Down Pricing Period shall commence on ____________.

     The  undersigned has executed this  Certificate  this ____ day of ________,
_____.

                                          L.A.M. PHARMACEUTICAL CORP.

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

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