Document:

EXHIBIT 10.5

                          SECURITIES PURCHASE AGREEMENT

                                   DATED AS OF

                                OCTOBER 23, 2000

                                 BY AND BETWEEN

                      PHAGE THERAPEUTICS INTERNATIONAL INC.
                                 AS THE ISSUER,

                                       AND

                                 THE PURCHASERS
                                  (as defined)

<PAGE>

<TABLE>
<CAPTION>

                                                                TABLE OF CONTENTS
<S>        <C>                                                                                                         <C>

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

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

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

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

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

ARTICLE VI AFFIRMATIVE COVENANTS........................................................................................... 11
           6.1 Information................................................................................................. 11
           6.2 Payment of Obligations...................................................................................... 11
           6.3 Maintenance of Existence.................................................................................... 12
           6.4 Compliance with Laws........................................................................................ 12
           6.5 Inspection of Property, Books and Records................................................................... 12
           6.6 Investment Company Act...................................................................................... 12
           6.7 Use of Proceeds............................................................................................. 12
           6.8 Compliance with Terms and Conditions of Material Contracts.................................................. 12
           6.9 Reserved Shares and Listings................................................................................ 12
           6.10 Transfer Agent Instructions................................................................................ 13

<PAGE>

           6.11 Maintenance of Reporting Status; Supplemental Information.................................................. 13
           6.12 Form D; Blue Sky Laws...................................................................................... 13
           6.13 Election of Directors...................................................................................... 13
           6.14 Sales by the Purchasers.................................................................................... 13
           6.15 Unit Offering.............................................................................................. 13
           6.16 Form 10SB-12g.............................................................................................. 13

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

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

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

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

                                LIST OF SCHEDULES
                                -----------------

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

                                LIST OF EXHIBITS
                                ----------------

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

</TABLE>

<PAGE>

                          SECURITIES PURCHASE AGREEMENT
                          -----------------------------

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

                                R E C I T A L S:

           WHEREAS:

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

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

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

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

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

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

                             ARTICLE I: DEFINITIONS

     1.1 Definitions.  The following  terms, as used herein,  have the following
meanings:

           "Affiliate" means, with respect to any Person (the "Subject Person"),
           (i) any other  Person (a  "Controlling  Person")  that  directly,  or
           indirectly through one or more  intermediaries,  Controls the Subject
           Person or (ii) any other Person  (other than the Subject  Person or a
           Consolidated Subsidiary of the Subject Person) which is Controlled by
           or is under common Control with a Controlling Person.

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                   ARTICLE II. PURCHASE AND SALE OF SECURITIES

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

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

<PAGE>

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

           2.2 Closing and Mechanics of Payment.

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

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

                   ARTICLE III. REPRESENTATIONS AND WARRANTIES

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

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

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

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

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

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

           (d)       This Agreement  constitutes,  and on execution and delivery
                     by  Phage,   each  of  the   Transaction   Agreements  will
                     constitute, a valid and binding agreement of Phage, in each
                     case  enforceable  against  Phage  in  accordance  with its
                     respective terms subject to:
                     (i)       applicable bankruptcy, insolvency or similar laws
                               affecting the enforceability of creditors rights
                               generally; and
                     (ii)      equitable principals of general applicability.

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

<PAGE>

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

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

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

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

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

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

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

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

               (b)  Phage Corporate Documents;

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

          ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

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

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

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

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

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

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

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

           (a)       the Units and the  underlying  Warrants and Shares have not
                     been and are not being registered under the 1933 Act or any
                     state  securities  laws,  and may not be offered  for sale,
                     sold,  assigned or  transferred  unless:

               (i)  subsequently registered there under; or

               (ii) such  Purchaser  shall have delivered to Phage an opinion of
                    counsel, in a generally  acceptable form, to the effect that
                    such  securities to be sold,  assigned or transferred may be
                    sold, assigned or transferred  pursuant to an exemption from
                    such registration requirements;

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

            ARTICLE V. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES

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

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

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

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

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

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

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

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

          (h)  There will exist no action,  suit,  investigation,  litigation or
               proceeding  pending  or  threatened  in any court or  before  any
               arbitrator or  governmental  instrumentality  that challenges the
               validity of or purports  to affect  this  Agreement  or any other
               Transaction  Agreement,  or other transaction  contemplated under
               this Agreement or that

<PAGE>

               could  reasonably be expected to have a Material  Adverse Effect,
               or any  material  adverse  effect  on the  enforceability  of the
               Transaction  Agreements  or the  Securities  or the rights of the
               holders of the Securities or the Purchasers hereunder; and

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

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

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

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

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

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

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

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

                        ARTICLE VI AFFIRMATIVE COVENANTS

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

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

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

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

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

           6.5 Inspection of Property,  Books and Records.  Phage will, and will
cause each Subsidiary to, keep proper books of record and account in which full,
true and  correct  entries  will be made of all  dealings  and  transactions  in
relation to their respective

<PAGE>

businesses  and  activities;  and will permit,  during  normal  business  hours,
Purchasers'  representative(s)  or an affiliate(s),  as  representatives  of the
Purchasers,  to  visit  and  inspect  any of  their  respective  properties,  on
reasonable  prior  notice,  to  examine  and  make  abstracts  from any of their
respective books and records and to discuss their respective  affairs,  finances
and accounts with their  respective  executive  officers and independent  public
accountants  (and by this  provision  Phage  authorizes its  independent  public
accountants to disclose and discuss with the  Purchasers  the affairs,  finances
and accounts of Phage and its Subsidiary in the presence of a representative  of
Phage;  provided,  however,  that  such  discussions  will  not  result  in  any
unreasonable expense to Phage, without Company consent),  all at such reasonable
times.

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

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

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

           6.9 Reserved Shares and Listings.

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

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

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

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

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

<PAGE>

United  States (or to obtain an  exemption  from such  qualification),  and will
provide  evidence of any such action so taken to the  Purchasers  on or prior to
the Initial Closing Date.

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

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

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

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

                        ARTICLE VII. RESTRICTIVE LEGENDS

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

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

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

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

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

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

              ARTICLE VIII. ADDITIONAL AGREEMENTS AMONG THE PARTIES

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

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

                 ARTICLE IX. PURCHASERS' RIGHT OF FIRST REFUSAL

<PAGE>

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

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

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

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

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

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

                            ARTICLE X. MISCELLANEOUS

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

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

<PAGE>

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

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

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

           10.2 No Waivers; Amendments.

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

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

                    (i)  reduce the  aggregate  principal  amount of Units whose
                         holders must consent to an amendment or waiver;
                    (ii) reduce  the rate or  extend  the time  for  payment  of
                         interest on any Unit; (iii) reduce the principal amount
                         of or extend the stated  maturity of any Unit;  or (iv)
                         make any Unit  payable in money or property  other than
                         as stated in such Unit.

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

           10.3 Indemnification.

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

          2)   The Purchasers  agrees to indemnify and hold harmless Phage,  its
               Affiliates,  and each Person,  if any, who controls Phage, or any
               of its  Affiliates,  within the meaning of the  Securities Act or
               the  Exchange  Act  (each,  a  "Controlling   Person"),  and  the
               respective  employees,  officers  and  Directors of Phage (each a
               "Company  Indemnified  Party")  and  collectively,  the  "Company
               Indemnified  Parties"),  from  and  against  any and all  losses,
               claims,  damages,  liabilities and expenses  (including,  without
               limitation and as incurred,  reasonable  costs of  investigating,
               preparing or defending  any such claim or action,  whether or not
               such Company Indemnified Party is a party thereto,  provided that
               the Purchasers will not be obligated to advance such costs to any
               Company Indemnified Party other than Phage unless it has received
               from such Company  Indemnified  Party an  undertaking to repay to
               the Purchaser the costs so advanced if it should be determined by
               final judgment of a court of

<PAGE>

               competent  jurisdiction  that such Company  Indemnified Party was
               not entitled to  indemnification  hereunder  with respect to such
               costs) which may be incurred by such Company Indemnified Party in
               connection  with any  investigative,  administrative  or judicial
               proceeding  brought or  threatened  that relates to or arises out
               of, or is in connection  with any activities  contemplated by any
               Transaction   Agreement  or  any  other   services   rendered  in
               connection  herewith;  provided that the  Purchasers  will not be
               responsible  for any  claims,  liabilities,  losses,  damages  or
               expenses  that are  determined  by final  judgment  of a court of
               competent  jurisdiction  to result from such Company  Indemnified
               Party's gross negligence, willful misconduct or bad faith.

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

               (i)  the Indemnifying  Party has failed to assume the defense and
                    employ counsel; or
               (ii) the  named  parties  to  any  such  action   (including  any
                    impleaded  parties) include such  Indemnified  Party and the
                    Indemnifying  Party,  and such  Indemnified  Party will have
                    been  advised by counsel that there may be one or more legal
                    defenses available to it which conflict with those available
                    to the Indemnifying Party;

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

                  PHAGE THERAPEUTICS INTERNATIONAL INC.

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

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

<PAGE>

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

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

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

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

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

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

Address: 105 Marbel Drive
            Grand Cayman BWI

<PAGE>

                                   SCHEDULE I

                             SCHEDULE OF PURCHASERS

     Name                   Address/Facsimile Number   $ Amount of Subscription
-------------------        -------------------------   -------------------------
Robert Miller              1645 South Miami Avenue          $  130,000
                            Miami, Florida 33129            $  220,000
                                                            ----------
                                                            $  350,000 = Total
Bolivar Longines SA        Centro Comercial Naraya          $   70,000
                            Piso 4 Oficina L-10
                           Alta Vista, Puerto Ordaz
                           Venezula
Ricardo Requena            25 de Mayo 444 Piso 2            $  140,000
                           11000 Montevideo
                           Urguay
Cadaques S.A.              Benito Blanco 675, Apt. 401      $  350,000
                           11300 Montevideo
                           Urguay
Blanca de Longo            Carace 524, Apt. 701             $   70,000
                           Montevideo
                            Urguay

Stratton S.A.              25 de Mayo 444 Piso 2            $  180,000
                           11000 Montevideo
                           Urguay
GIG Limited                105 Marbel Drive                 $  350,000
                           Grand Cayman BWI

                                                          ------------------
                                                   TOTAL:  $ 1,510,000[logo]             SOFTWARE LICENSE AGREEMENT

THIS SOFTWARE LICENSE AGREEMENT (the  "Agreement")  dated as of June 30, 2000 is
made between THE  DESCARTES  SYSTEMS GROUP INC.,  an Ontario  corporation,  with
offices at 120 Randall  Drive,  Waterloo,  Ontario,  Canada,  N2V 1C6 on its own
behalf or on behalf of its subsidiary companies (collectively referred to herein
as "Descartes") and LAZYGROCER.COM INC., an Ontario corporation, with offices at
41 York Street, 3rd Floor, Ottawa, Ontario, K1N 5S7, (hereinafter referred to as
the "Customer").

In  consideration  of the mutual  promises and agreements  contained  herein and
other good and valuable  consideration (the receipt and sufficiency of which are
hereby acknowledged),  the parties,  intending to be legally bound hereby, agree
as follows:

1.
1. DEFINITIONS

1.1. "Confidential  Information" means any information disclosed by one party to
the other  pursuant  to this  Agreement  which is in written,  graphic,  machine
readable, or other tangible form and is marked "Confidential",  "Proprietary" or
in some other manner to indicate its confidential  nature.  Notwithstanding  the
foregoing  designation  requirements,  the Software,  the  Documentation and the
results  of any  benchmark  tests  run on the  Software  shall be  deemed  to be
Confidential  Information  of Descartes.

1.2.  "Descartes  Software"  means  the  software  identified  on Appendix  1 as
Descartes  Software,  including  applicable  Documentation and Revisions but not
including any Third Party Software;

1.3. "Designated  CPU" means the one or more  CPU(s)  identified  on Appendix 1;

1.4.  "Designated  Site"  means those  facilities  of  Customer,  identified  on
Appendix 1, at which the Designated CPU is located;

1.5.  "Documentation"   means  any  instructional  or  supplementary   materials
related to the Software,  in human or machine readable form, that is provided by
Descartes to Customer  pursuant to this  Agreement,  but only to the extent that
Descartes, in its sole discretion,  makes such materials generally available for
commercial distribution.

1.6.  "Hardware"  means  any  third  party  hardware that  Descartes may sell to
Customer pursuant to Section 3.4 of this Agreement.

1.7.  "Intellectual  Property  Rights" means  patents  and other  patent  rights
(including   patent   disclosures  and   applications   and  patent   divisions,
continuations,  continuations-in-part,  reissues, reexaminations, and extensions
thereof),  copyrights,  and  other  rights  in  works of  authorship  (including
registered and  unregistered  copyrights and  unpublished  works of authorship),
trade secrets, and all other forms of intellectual  property in existence on the
Effective Date;

1.8.  "Object   Code"   means   computer  programs  assembled   or  compiled  in
magnetic or electronic  binary form,  which are readable and usable by machines,
but   not    generally    readable   by   humans    without    reverse-assembly,
reverse-compiling, or reverse engineering.

1.9. "Revision"   means  any  modification,  improvement,  enhancement,  update,
upgrade, or other change made to the Software by or on behalf of Descartes,  but
only to the extent that  Descartes,  in its sole  discretion,  makes such change
generally available for commercial distribution;

1.10.  "Software"  means  Descartes  Software  and  Third  Party Software,  each
provided solely in Object Code form;

1.11.  "Source Code" means computer programs written in higher-level programming
languages.  Source  Code  is intelligible  to  trained  programmers  and  may be
translated  to Object  Code for  operation on  computer  equipment  through  the
process of compiling.

1.12. "Subsidiary"  means  a corporation  in  which Customer  holds greater than
fifty percent (50%) of the outstanding voting securities;

1.13. "Third Party Licensors" means those third parties identified in Appendix 1
who have granted to Descartes the right to sublicense  certain  rights in and to
the Third Party  Software;

1.14.  "Third Party  Software" means the proprietary
software and  proprietary  data of a party other than Descartes as identified on
Appendix 1 as Third Party  Software;  and 1.15.  "Use"  means to load,  execute,
employ,  utilize, store, or display the Software for internal business purposes,
and not for  redistribution,  remarketing,  or third party  service  use. Use is
deemed to occur where any such process  occurs and at any  computer  terminal or
workstation that initiates or is activated by any such process.

2. LICENSE.

2.1. License Grant.  Subject  to the  terms and  conditions of  this  Agreement,
Descartes  hereby grants and Customer  accepts under all  Intellectual  Property
Rights (other than trademarks)  owned by Descartes or to which Descartes has the
right  to  grant  licenses  without  payment  of  additional  consideration,   a
nonexclusive,  nontransferable  license to Use the Software for  Customer's  own
internal data processing only. Customer agrees that this license does not permit
Customer to loan, sub-license,  rent or otherwise make the Software available to
any third party except as expressly provided herein.

2.2.  Use  Restrictions.  Customer  agrees  to  install  the  Software  on   the
Designated  CPU(s)  only  at the  Designated  Site(s).  Customer  shall  Use the
Software  only  in  accordance  with  the   Documentation  and  subject  to  any
restrictions on Use as may be set out in Appendix 1.

2.3.  Copying.  Customer  may  make  one  copy  of  the  Software to be used for
archival  purposes and/or back-up  purposes  consistent  with Customer's  normal
periodic back-up procedures. Customer may not otherwise copy the Software except
as permitted by applicable law.  Subject to  availability,  Customer may request
additional copies of Documentation at Descartes' then current rates.

2.4. Transfers.  Customer  may  transfer the  Software  from a Designated CPU to
another CPU at a licensed  Designated Site upon prior written  authorization  by
Descartes and upon payment of Descartes' then applicable  administration fee for
such  transfer.  The Software must be promptly  deleted in its entirety from the
Designated  CPU and archival or backup copies for that  Designated CPU must also
be deleted.  Any further  transfer shall require an additional  written  consent
from Descartes.

2.5. CPU  Restrictions.  For  each  license  it has acquired,  Customer  may Use
one copy of the Software on the Designated  CPU. If the Designated CPU is acting
as a network  server,  any number of  computers  or  workstations  may access or
otherwise utilize the basic network services of that server;  however,  Customer
must  acquire  and  dedicate a license for each  separate  computer on which the
Software  is  installed  or run from the server such that the number of licensed
users as set out in Appendix 1 is not exceeded.

2.6.  Inability  to  Use.  If   Customer is  unable to  Use the  Software on the
Designated CPU because of conditions beyond its reasonable control, Customer may
temporarily  install and Use the  Software on  equivalent  equipment  until such
condition is corrected; provided that the temporary installation does not impair
Customer's ability to prevent  unlicensed access to or Use of the Software;  and
further  provided that Customer has given written notice to Descartes within two
business days of such installation.

2.7.  Reverse  Engineering.  Customer  is prohibited  from reverse  engineering,
disassembling  or decompiling the Software or otherwise  attempting to create or
generate  any  source  code  version  of any  part of the  Software,  except  as
permitted by applicable  law, and to the extent that  Descartes is not permitted
by such applicable law to exclude or limit such rights.  Information relating to
the Software  which is necessary to enable the  production of software  which is
interoperable or compatible with the Software or other software may be available
from Descartes upon written request.

2.8.  Subsidiaries.  Customer  shall  be  permitted  to  sublicense  the  rights
granted to Customer  under  Section  2.1 hereof to a  Subsidiary  provided  that
Customer  and  Subsidiary  enter  into an  agreement  with  Descartes  in a form
approved by Descartes and provided that the total  aggregate  number of licensed
users between  Customer and  Subsidiary (or  Subsidiaries)  shall not exceed the
number of licensed users as set out in Appendix 1.

2.9.  Additional  Users  or  Additional  Software.  Provided  that Customer  has
performed all of its obligations under this Agreement including, but not limited
to, the payment of all charges due, Customer may request licenses for additional
users of the  Software  or may request  licenses  for other  Descartes  software
products  upon  delivery of a written  purchase  request in the form required by
Descartes from time to time provided that Descartes  shall have no obligation to
accept such purchase request.  If Descartes  accepts such purchase request,  the
terms  and  conditions  of this  Agreement  shall,  unless  otherwise  expressly
provided in writing, apply to all software supplied thereunder.

3. PAYMENT

3.1.  License Fees. In  consideration of the license granted pursuant to Section
2.1 hereof,  Customer  shall pay to Descartes the license fees as set out in the
attached  Appendix  1 (the  "License  Fees")  on such  terms  set  out  therein.
Customer's  rights under Section 2.1 are contingent upon Customer's  performance
of its  obligations  under  this  Agreement,  including  but not  limited to the
payment of all charges  due,  and no right or license is granted by Descartes to
Customer except when and as such obligations are performed.

3.2. Taxes.  Customer shall be responsible  for all sales,  use, value added, or
other  taxes  payable  with  respect to the  Software,  or arising  out of or in
connection with this Agreement, other than Descartes' income taxes. If Descartes
pays such taxes on Customer's behalf, Customer agrees to reimburse Descartes for
such payment. If any tax in the nature of withholding tax is payable on any sums
payable to Descartes  under this  Agreement,  Customer  shall pay Descartes such
amount as is necessary to ensure that the net amount received by Descartes after
such withholding shall be equal to the amount originally due.

3.3.  Maintenance Fees.  Customer shall pay to Descartes the annual  maintenance
fees as set out in the  attached  Appendix  1 (the  "Maintenance  Fees") on such
terms set out  therein.  3.4.  Hardware.  If any  Hardware  is to be supplied by
Descartes to Customer under this  Agreement,  a list of such  Hardware,  and the
terms and conditions upon which it is supplied by Descartes to Customer, are set
out on Appendix 3. Without in any way limiting the  generality  of the terms and
conditions  set  out in  Appendix  3,  subject  to the  manufacturer's  warranty
provisions that accompany the Hardware,  the Hardware is provided to Customer by
Descartes on an "as is" basis without any warranties whatsoever.  3.5. Maps/Maps
Package.  If Customer is granted a license for certain maps and/or maps packages
as part of this  Agreement,  Customer  agrees that, in addition to the terms and
conditions  of  this  Agreement,  such  license  is  subject  to the  terms  and
conditions as set out in the Maps Package Addendum attached as Appendix 4.

4. WARRANTIES

4.1. Support and  Maintenance.  Upon payment of the Maintenance  Fees,  Customer
shall be  enrolled  in and  entitled  to receive  the  maintenance  and  support
services as set out in the Software Maintenance Program (the "SMP") described in
Appendix  2.  Customer  shall  be  automatically  re-enrolled  in  the  SMP  for
consecutive  twelve month periods on each  anniversary  of the Effective Date at
Descartes' then applicable fees therefore, unless written notice of cancellation
of its  participation  in the SMP has been delivered by Customer to Descartes no
later than thirty (30) days prior to the commencement of the renewal period.

4.2.  Year 2000  Compliance.  Descartes  warrants  that the  Descartes  Software
containing or calling on a calendar function including,  without limitation, any
function  index  to  a  CPU  clock  and  any  function  (including   appropriate
translation of century data received from  interfacing  applications)  providing
specific  dates or days for  calculating  spans of dates or days,  shall record,
store,  process,  provide and, where applicable,  insert true and accurate dates
for the dates and spans  including and after January 1, 2000 with  generally the
same  functionality  and data  integrity as delivered by the Descartes  Software
prior to December 31, 1999. The representations and warranties set forth in this
section  shall  survive  until  January  31, 2001 or until  termination  of this
agreement,  whichever is earlier.  Notwithstanding  anything contained herein to
the contrary, the representations and warranties set forth in this section shall
not apply to the Descartes  Software to the extent that the  Descartes  Software
has been combined with and/or interoperates with other software/firmware or data
that is not year 2000 compliant.  In the event that Descartes becomes aware that
the Descartes  Software does not comply with the foregoing  warranty,  Descartes
shall be  entitled  to remedy  any  breach of this  warranty  upon  delivery  to
Customer of a new release or patch that, following installation, would bring the
Descartes Software into compliance with this warranty.

4.3.  Manufacturer's  Warranties.  Descartes  hereby  assigns  to  Customer  all
manufacturers'  warranties  in respect of any Third  Party  Software or Hardware
that may be delivered as part of this Agreement or otherwise, to the extent that
such warranties are assignable.

4.4.  Disclaimer of Warranties.  EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
DESCARTES  MAKES NO  REPRESENTATIONS,  WARRANTIES  OR  CONDITIONS  OF ANY  KIND,
EXPRESS OR IMPLIED  WITH  RESPECT TO THE  SOFTWARE OR ANY  HARDWARE  THAT MAY BE
DELIVERED AS PART OF THIS AGREEMENT OR OTHERWISE, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW,  SPECIFICALLY  DISCLAIMS ANY IMPLIED WARRANTIES OR CONDITIONS OF
MERCHANTABILITY,  FITNESS FOR A PARTICULAR PURPOSE,  TITLE AND NON-INFRINGEMENT.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, CUSTOMER ASSUMES THE ENTIRE RISK
AS TO THE RESULTS AND  PERFORMANCE  OF THE  SOFTWARE OR ANY  EQUIPMENT  RECEIVED
UNDER  THIS  AGREEMENT.  WITHOUT  LIMITING  THE  GENERALITY  OF  THE  FOREGOING,
DESCARTES  DOES NOT  REPRESENT  OR WARRANT  THAT THE  SOFTWARE OR HARDWARE  WILL
OPERATE UNINTERRUPTED OR THAT IT WILL BE FREE FROM DEFECTS OR ERRORS OR THAT THE
SOFTWARE IS DESIGNED TO MEET CUSTOMER'S BUSINESS REQUIREMENTS. IN NO EVENT SHALL
DESCARTES BE RESPONSIBLE FOR THE PREPARATION OR CONVERSION OF DATA INTO THE FORM
REQUIRED FOR USE WITH THE SOFTWARE OR ANY HARDWARE DELIVERED HEREUNDER.

5. LIMITATION OF LIABILITY.

5.1.  AGGREGATE  LIABILITY.  CUSTOMER  AGREES THAT,  TO THE EXTENT  PERMITTED BY
APPLICABLE  LAW,  ANY  LIABILITY  ON THE PART OF  DESCARTES  FOR  BREACH  OF ANY
PROVISION  OF THIS  AGREEMENT  OR ANY OTHER  BREACH  GIVING  RISE TO  LIABILITY,
INCLUDING  A BREACH OF A  CONDITION  OR  FUNDAMENTAL  TERM;  OR IN ANY OTHER WAY
ARISING  OUT OF OR  RELATED  TO  THIS  AGREEMENT  OR,  WITHOUT  LIMITATION,  THE
SOFTWARE;  FOR ANY  CAUSE OF ACTION  WHATSOEVER  AND  REGARDLESS  OF THE FORM OF
ACTION  (INCLUDING  BREACH OF  CONTRACT,  TORT,  OR ANY OTHER LEGAL OR EQUITABLE
THEORY),  SHALL BE LIMITED TO CUSTOMER'S  ACTUAL DIRECT DAMAGES IN AN AMOUNT NOT
TO EXCEED THE TOTAL  AMOUNT PAID TO  DESCARTES BY CUSTOMER IN RESPECT OF LICENSE
FEES UNDER THIS AGREEMENT.

5.2.  Consequential Damages. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, UNDER
NO  CIRCUMSTANCES  SHALL DESCARTES OR ITS LICENSORS BE LIABLE TO CUSTOMER OR ANY
OTHER PERSON, FIRM,  CORPORATION OR ENTITY FOR SPECIAL,  INCIDENTAL,  EXEMPLARY,
PUNITIVE,  MULTIPLE,  CONSEQUENTIAL,  OR INDIRECT  DAMAGES,  INCLUDING,  WITHOUT
LIMITATION,  DAMAGES FOR LOSS OF GOODWILL OR BUSINESS PROFITS,  LOSS OF REVENUE,
WORK  STOPPAGE,  DATA LOSS,  OR COMPUTER  FAILURE OR  MALFUNCTION,  WHETHER SUCH
DAMAGES ARE ALLEGED IN TORT,  CONTRACT OR OTHERWISE,  EVEN IF DESCARTES HAS BEEN
ADVISED OF THE  POSSIBILITY  OF SUCH DAMAGES.  CUSTOMER  AGREES THAT IN NO EVENT
WILL DESCARTES' DIRECTORS, OFFICERS, EMPLOYEES OR SHAREHOLDERS BE LIABLE FOR ANY
DAMAGES, INCLUDING DIRECT, INCIDENTAL,  ORDINARY, PUNITIVE, EXEMPLARY, INDIRECT,
SPECIAL,  CONSEQUENTIAL  OR ANY OTHER DAMAGES  ARISING OUT OF OR RELATED TO THIS
AGREEMENT.

5.3. Time for Commencement of Action.  NO ACTION AGAINST DESCARTES OR ANY OF ITS
DIRECTORS,  OFFICERS,  EMPLOYEES OR SHAREHOLDERS,  REGARDLESS OF FORM (INCLUDING
NEGLIGENCE), ARISING OUT OF ANY CLAIMED BREACH OF THIS AGREEMENT OR TRANSACTIONS
UNDER  THIS  AGREEMENT  OR IN ANY OTHER WAY  RELATED  TO THIS  AGREEMENT  MAY BE
BROUGHT BY CUSTOMER MORE THAN ONE YEAR AFTER THE CAUSE OF ACTION HAS ARISEN.

6. INTELLECTUAL PROPERTY

6.1.  Ownership.  Descartes and its  licensors  shall have and retain all right,
title, and interest,  including any copyrights,  patents,  trade secrets,  moral
rights and other Intellectual Property Rights, in and to the Software including,
without limitation, any modifications, changes or additions to the Software.

6.2. Legends to be Produced. Customer shall include Descartes and its licensors'
copyright and other proprietary notices on any complete or partial copies of the
Software or any equipment  delivered  under this  Agreement in the same form and
location as the notice  appears on the original work. In no event shall any such
notices be removed.

7. INDEMNIFICATION

7.1. Descartes  Indemnification.  Descartes shall defend Customer, at Descartes'
expense,  from and against any claim brought by a third party  alleging that the
Descartes  Software infringes any (i) United States or Canadian patent issued as
of the Effective Date, (ii) United States or Canadian trademark issued as of the
Effective Date, (iii)  copyright,  or (iv) trade secret,  and shall,  subject to
Section 5.1 hereof,  indemnify  Customer  against all damages and costs assessed
against  Customer  that are payable as part of a final  judgment or  settlement.
Should the Descartes  Software  become,  or in  Descartes'  opinion be likely to
become,  the  subject of a claim of  infringement,  Descartes  may,  at its sole
option  and/or  election  use  reasonable  commercial  efforts to (a) obtain for
Customer  the right to continue  using the  Descartes  Software  pursuant to the
terms and conditions of this  Agreement,  or (b) replace or modify the Descartes
Software  so that it becomes  noninfringing  but  functionally  equivalent.  The
indemnification  obligation  of this  Section  7.1  shall not apply to any claim
arising out of (i) the combination of the Descartes Software with other products
not  claimed to be owned or  developed  by or on behalf of  Descartes,  (ii) the
modification  of the  Descartes  Software,  or any  part  thereof,  unless  such
modification was made by or for Descartes,  or (iii) any infringement  caused by
any action of Customer.

7.2. Customer Indemnification.  Except for those matters for which Descartes may
have an  indemnification  obligation  under Section 7.1 hereof,  Customer  shall
indemnify and hold harmless Descartes from and against any costs and liabilities
incurred  by  Descartes  resulting  from or arising  out of third  party  claims
brought against Descartes as a result of Customer's Use of the Software.

7.3. Notice of Indemnification. A party seeking indemnification pursuant to this
Section 7 (an Indemnified Party) from or against the assertion of any claim by a
third person (a Third Person  Assertion)  shall give prompt  notice to the party
from whom indemnification is sought (the Indemnifying Party); provided, however,
that failure to give prompt notice shall not relieve the  Indemnifying  Party of
any  liability  hereunder  (except  to the  extent  the  Indemnifying  Party has
suffered actual material prejudice by such failure).

7.4.  Assumption  of Defense.  Within  twenty (20)  business  days of receipt of
notice  from  the  Indemnified  Party  pursuant  to  Section  7.3  hereof,   the
Indemnifying  Party shall have the right  exercisable  by written  notice to the
Indemnified  Party,  to assume the defense of a Third Person  Assertion.  If the
Indemnifying  Party  assumes such  defense,  the  Indemnifying  Party may select
counsel, which shall be reasonably acceptable to the Indemnified Party.

7.5.  Failure  to  Defend.  If the  Indemnifying  Party (a) does not  assume the
defense of any Third Person Assertion in accordance with Section 7.4 hereof;  or
(b) having so assumed such defense,  unreasonably  fails to defend  against such
Third  Person  Assertion,  then,  upon twenty (20) days'  written  notice to the
Indemnifying  Party, the Indemnified  Party may assume the defense of such Third
Person  Assertion.  In such event, the Indemnified Party shall be entitled under
this Section 7 as part of its damages to  indemnification  for the costs of such
defense.

7.6.  Conflicts of Interest.  If the Indemnifying  Party has been advised by the
written  opinion of counsel  to the  Indemnified  Party that the use of the same
counsel to represent both the Indemnified Party and the Indemnifying Party would
present a conflict of interest,  then the  Indemnified  Party may select its own
counsel to represent the Indemnified  Party in the defense of the matter and the
costs of such defense shall be borne by the Indemnifying Party. The Indemnifying
Party shall be entitled  to  continue to handle its own  representation  in such
matter through its own counsel.

7.7.  Settlement.  The party controlling the defense of a Third Person Assertion
shall have the right to consent to the entry of  judgment  with  respect  to, or
otherwise settle,  such Third Person Assertion with the prior written consent of
the other party, which consent shall not be unreasonably withheld.

7.8.  Participation.  Notwithstanding  the  assumption of the defense of a Third
Person  Assertion by either party in  accordance  with this Section 7, the other
party shall agree to cooperate,  as necessary,  in the defense or prosecution of
any Third  Party  Assertion  and shall be entitled  to  participate,  at its own
expense,  in the  defense or  settlement  of any Third  Person  Assertion.  7.9.
Descartes Duty to Indemnify Customer. THE PROVISIONS OF THIS SECTION 7 STATE THE
SOLE,  EXCLUSIVE,  AND ENTIRE  LIABILITY  OF  DESCARTES,  AND ITS  LICENSORS  TO
CUSTOMER AND CUSTOMER'S  SOLE REMEDY WITH RESPECT TO THE  INFRINGEMENT  OF THIRD
PARTY INTELLECTUAL PROPERTY RIGHTS.

8. CONFIDENTIALITY

8.1. Non-Disclosure.  Customer and Descartes each agree to treat as confidential
all Confidential  Information of the other party,  not to use such  Confidential
Information  except as set forth  herein and not to disclose  such  Confidential
Information to any third party except as may be reasonably  required pursuant to
this Agreement and subject to confidentiality obligations at least as protective
as those set forth herein.  Without  limiting the  generality of the  foregoing,
each of the parties  shall use at least the same degree of care which it uses to
prevent the disclosure of its own confidential information of like importance to
prevent the disclosure of Confidential  Information disclosed to it by the other
party  under this  Agreement,  provided,  however,  that in no event  shall such
degree of care be less than  reasonable in light of general  industry  practice.
Notwithstanding the foregoing,  neither party hereto shall have liability to the
other with regard to any Confidential  Information of the other which (i) was in
the public  domain at the time it was  disclosed or becomes in the public domain
through  no  fault of the  receiver;  (ii) was  known to the  receiver,  without
restriction,  at the time of disclosure as shown by the files of the receiver in
existence at the time of  disclosure;  (iii) is disclosed with the prior written
approval of the  discloser;  (iv) was  independently  developed  by the receiver
without  any use of the  Confidential  Information;  (v)  becomes  known  to the
receiver, without restriction,  from a source other than the discloser,  without
breach of this Agreement by receiver; or (vi) is disclosed pursuant to the order
or requirement of a court,  administrative  agency, or other  governmental body,
provided,  however,  that the receiver  shall provide  prompt notice  thereof to
enable the  discloser  to seek a  protective  order to  otherwise  prevent  such
disclosure.

8.2.  Protective  Measures.  Customer  and  Descartes  each  agree  to  use  all
reasonable efforts, including,  without limitation, the execution of proprietary
non-disclosure agreements by employees and subcontractors,  to ensure compliance
with  the   provisions  of  Section  8.1  above  by  its  officers,   employees,
subcontractors   and  any  third  party  having   access  to  the   Confidential
Information.

8.3.  Irreparable  Harm.  Customer  and  Descartes  each  acknowledge  that  any
disclosure to third parties of Confidential  Information may cause immediate and
irreparable harm to the other.

9. TERMINATION.

9.1. Term.  This Agreement  shall become  effective upon the Effective Date, and
shall  remain in force until  terminated  as provided  in this  Agreement.

9.2.  Termination of this Agreement.  This Agreement,  including the SMP, may be
terminated  by either party if there is a material  breach of any  provisions of
this Agreement  which  continues  unremedied for a period of ten (10) days after
the party  terminating  has given  written  notice  of its  intent to  terminate
together  with  details of the material  breach,  provided,  however,  that this
Agreement may be terminated immediately upon delivery of written notice (without
a cure period) in the event of a breach of Sections  2.1,  2.2, 2.3, 2.4, 2.5 or
2.7 hereof.

9.3.  Termination  by  Descartes.  This  Agreement,  including  the SMP,  may be
terminated  by Descartes  upon written  notice if Customer  provides  materially
false or incorrect information in conjunction with this Agreement,  any Customer
application  form or any Customer  credit  application  on the date submitted to
Descartes.

9.4. Copies.  Upon termination  of  this  Agreement, Customer  shall immediately
discontinue  Use of and  destroy or return to  Descartes  the  Software  and any
archival or back-up copy of the Software.

9.5.  Survival.  Notwithstanding   any   expiration   or   termination  of  this
Agreement for any reason, Sections, 1, 3, 4, 5, 6, 7, 8, 9.5 and 10 hereof shall
survive such expiration or termination.

10. GENERAL

10.1. Audit Right. During normal business hours and at any time during which the
Software  is being  utilized,  Descartes  or its  authorized  representative  or
licensors,  shall have the right,  upon reasonable  advance notice, to audit and
inspect  Customer's  utilization of the Software,  in order to verify compliance
with the terms and conditions of this Agreement.

10.2.  Collection  Expenses.  Customer agrees to reimburse Descartes for any and
all collection  related expenses  incurred by Descartes in the collection of any
amounts  owed  to  Descartes  pursuant  to  this  Agreement  including,  without
limitation, license fees and maintenance fees and taxes thereon.

10.3.  Agreement Binding.  Subject to Section 10.19 hereof, this Agreement shall
be  binding  upon and  inure to the  benefit  of the  parties  hereto  and their
respective  successors  and permitted  assigns.

10.4. Entire Agreement.  This Agreement constitutes the entire agreement between
the parties  regarding its subject matter and  supersedes  all prior  proposals,
agreements  and  understandings  between the  parties,  whether oral or written.
Unless made in writing and executed by duly authorized  representatives  of both
parties to this  Agreement,  no amendments or  modifications  to this  Agreement
shall be binding and except as  provided  for in Section 2.9 hereof the terms of
any purchase  order or other  document  submitted by Customer to Descartes  from
time to time  shall  be of no  force  or  effect  to the  extent  that  they are
inconsistent with the terms of this Agreement.

10.5. Appendices. The appendices and schedules referred to in this Agreement and
attached  hereto are  incorporated  herein to the same extent as if set forth in
full in this Agreement.  In the event of any inconsistency  between any appendix
or schedule and the main body of this Agreement, the terms and conditions of the
main body shall prevail unless otherwise  expressly  provided to the contrary in
such appendix or schedule.

10.6.  Construction.  Each provision of this  Agreement  shall be interpreted in
such a manner as to be  effective  and valid under  applicable  law,  but if any
provision of this Agreement shall be prohibited or invalid, such provision shall
be  ineffective  only to the extent of such  prohibition or invalidity and shall
not invalidate  the remainder of such  provision or the remaining  provisions of
this Agreement in that or other jurisdictions which provisions shall continue in
full force and effect.

10.7.  Waiver.  Neither party hereto shall, by mere lapse of time without giving
notice or taking other action hereunder,  be deemed to have waived any breach by
the other party of any provision of this  Agreement.  Failure by either party to
enforce  any term of this  Agreement  shall  not be  deemed a waiver  of  future
enforcement of that or any other term in this Agreement.

10.8.  Multiple  Counterparts.  This  Agreement  may  be  executed  in   several
counterparts,  all of which taken together shall constitute one single Agreement
between the parties.

10.9. Execution by Facsimile. Execution and delivery of a facsimile transmission
of this Agreement shall constitute, for purposes of this Agreement,  delivery of
an executed original and shall be binding upon the party whose signature appears
on the transmitted copy. Any party so executing this Agreement hereby undertakes
to  originally-execute  and  deliver  to the other  party  hereto a copy of this
Agreement as soon as possible after execution by facsimile.

10.10.  Compliance  With Law.  Each party  agrees to comply with all  applicable
laws, regulations,  and ordinances relating to its performance hereunder.

10.11. Notice. Any notices,  demands and other communications hereunder shall be
in writing and shall be delivered in person, mailed by first class mail, postage
prepaid  (registered  or  certified  to the  extent  available,  and  airmail if
overseas),  couriered overnight, or sent by telecopy to the party to receive the
notice at the applicable address, set out on Appendix 1 or at such other address
as may be designated in writing by the receiving  party.  All such notices shall
be effective upon receipt.

10.12.  Dispute  Resolution.  Except for the right of either party to apply to a
court of competent  jurisdiction  for interim or  interlocutory  relief or other
provisional remedy to prevent irreparable harm pending final determination or to
pursue a claim for infringement of any intellectual  property right, any dispute
or controversy  between the parties arising out of or relating to this Agreement
(each,  a "Dispute")  shall be resolved by good faith  negotiations  between the
parties  which  negotiations  shall not  terminate  until the  Dispute  has been
considered  by a senior  officer of each  party.  If such  negotiations  fail to
produce  a  resolution  to the  Dispute,  the  Dispute  shall be  determined  by
arbitration  before a single  arbitrator  pursuant to the Arbitration  Act, 1991
(Ontario).  The  award  rendered  by the  arbitrator  shall be  final,  binding,
conclusive and not subject to appeal.  The prevailing party shall be entitled as
part of the arbitration  award to the reasonable  costs and expenses  (including
legal fees) of investigation,  preparing and pursuing such claim or defence, and
the party enforcing an award shall be entitled to reasonable  costs and expenses
(including legal fees) incurred in connection therewith.

10.13.  Personnel.  Customer  for itself and all  companies  associated  with or
related to Customer  agrees not to solicit or, without the express prior written
consent of Descartes (which may be arbitrarily  withheld),  employ any personnel
of Descartes (or of any  subsidiary or affiliated  company of Descartes)  during
the  term of this  Agreement,  and  for a  period  of two  years  following  any
expiration or termination of this Agreement.

10.14.  Third  Party  Beneficiaries.  Customer  acknowledges  that the  Software
contains  software,  computer  programs and proprietary  data of the Third Party
Licensors.  In addition to any other limitations or restrictions set out in this
Agreement,  the Third  Party  Licensors  shall not be  liable  for any  damages,
whether direct,  indirect,  incidental or consequential  arising from the use of
the Software.  Customer  agrees that prior to delivery of any of the Third Party
Software, Customer shall enter into any further agreements which may be required
by a Third Party Licensor and Customer specifically  acknowledges that the Third
Party Licensors shall be third party beneficiaries of this Agreement.

10.15.  Export.  Customer agrees to comply with all domestic,  foreign and local
export laws and  regulations  applicable  to the Software  should such export be
permitted under this Agreement.

10.16.  Inherently  Dangerous  Applications.  THE  SOFTWARE IS NOT  SPECIFICALLY
DEVELOPED OR LICENSED FOR USE IN ANY NUCLEAR,  AVIATION, MASS TRANSIT OR MEDICAL
APPLICATION  WHERE THE  FAILURE  OF THE  SOFTWARE  COULD  RESULT IN  SIGNIFICANT
INJURIES INCLUDING  POSSIBLE LOSS OF LIFE, OR IN ANY OTHER INHERENTLY  DANGEROUS
APPLICATIONS.  CUSTOMER  AGREES THAT NEITHER  DESCARTES NOR ANY OF ITS LICENSORS
SHALL BE LIABLE FOR ANY CLAIMS OR DAMAGES  ARISING FROM SUCH USE OF THE SOFTWARE
IF CUSTOMER USES THE SOFTWARE FOR SUCH INHERENTLY DANGEROUS APPLICATIONS.

10.17.  Government  Departments.  In the event that  Customer is a  governmental
entity,  only those  departments or agencies listed in this Agreement shall have
the  right  to  use  the  Descartes  Software  and  Documentation.  Governmental
departments  or agencies not listed must have a separate  license  agreement and
pay additional license fees.

10.18. U.S.  Government  Users.  The Descartes  Software and  Documentation  are
"commercial  items" as that term is defined in 48 C.F.R.  2.101  (October  1995)
consisting of "commercial  computer software" and "commercial  computer software
documentation"  as such  terms are used in 48 C.F.R.  12.212  (September  1995).
Consistent with 48 C.F.R. 12.212 and C.F.R.  227.7202-1 through 227.7202-4 (June
1995), if the licensee  hereunder is the federal government of the United States
of America or any agency or  department  thereof,  the  Descartes  Software  and
Documentation are licensed hereunder (i) only as commercial items, and (ii) with
only those rights as are granted to others  pursuant to the terms and conditions
of this Agreement.

10.19.  Assignment.  Customer  may not,  without  the prior  written  consent of
Descartes  and  payment  of any  applicable  administrative  fee  in  connection
therewith,  assign  or  transfer  this  Agreement  or  any  obligation  incurred
hereunder, including without limitation by change of effective voting control of
Customer, merger, reorganization, consolidation, or sale of all or substantially
all of  Customer's  assets  and any  attempt to do so in  contravention  of this
Section 10.19 shall be void and of no force and effect. Nothing contained herein
shall prevent  Descartes  from assigning or  transferring  this Agreement to any
party who has the right to grant the licenses provided for herein and has agreed
to assume the obligations of Descartes hereunder.

10.20. Acknowledgment.  Customer publications in which the Descartes Software is
implicitly or explicitly  mentioned  shall  include an  acknowledgment  that the
Descartes Software "is a proprietary  software product licensed by The Descartes
Systems Group Inc. or its Subsidiaries". In addition, Customer agrees to provide
Descartes with a copy of the proposed publication not less than 10 days prior to
the publication thereof.

10.21. Announcements.  Unless otherwise required by applicable securities law or
regulation,  no announcement  shall be made by either party with respect to this
Agreement  unless in a form  mutually  agreed to by both  parties  in writing in
advance. Customer acknowledges that Descartes is a publicly traded company which
is  required by law to  disclose  all  transactions  which it  determines  to be
material  to its  business  and shall,  upon  providing a copy to  Customer,  be
entitled to issue a press release in respect of the transaction  contemplated by
this Agreement if Descartes  determines that such transaction is material to its
business.

10.22.  Governing Law. This Agreement  shall be governed by and construed  under
the laws of the Province of Ontario, including applicable Canadian federal laws,
without  reference to its  conflicts of law  principles  and the parties  hereby
submit to the sole and exclusive  jurisdiction  of the courts of the Province of
Ontario for all matters under this  Agreement  that may be properly  resolved by
judicial  decision.   The  parties  specifically  disclaim  the  United  Nations
Convention on Contracts for the International Sale of Goods.

10.23. Further Assurances. The parties hereto shall with reasonable diligence do
all such things and provide all such reasonable assurances as may be required to
consummate the transactions  contemplated  hereby,  and each party shall provide
such  further  documents  or  instruments  required by any other party as may be
reasonably  necessary or desirable to effect the purpose of this  Agreement  and
carry out its provisions.

10.24. English Language Provision.  The parties acknowledge having required that
this Agreement and all documents, notices and judicial proceedings entered into,
given or instituted  pursuant hereto, or relating directly or indirectly hereto,
be drawn up in English.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date by their duly authorized representatives as set forth below.

THE DESCARTES SYSTEMS GROUP INC.                     LAZYGROCER.COM INC.

Per:  _________________________           Per:__________________________________

Name:                                     Name:

Title:                                    Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}]]