PRODUCT DEVELOPMENT AND LICENSE AGREEMENT

     This license agreement (the “Agreement”) dated as of June 16, 2004 (the
“Effective Date”) is entered into by and between Nostrum Pharmaceuticals, Inc.
(“Nostrum”), a Delaware corporation, and Bionutrics, Inc. (“Bionutrics”), a
Nevada corporation.

WHEREAS,

     A.     Nostrum has developed, and is in the process of developing,
controlled release and other technology for pharmaceutical products.

     B.     Bionutrics is researching, developing, manufacturing, marketing and
selling pharmaceutical products.

     C.     Bionutrics desires to license from Nostrum the exclusive right to
develop, manufacture, market and sell the Products (as hereinafter defined) in
the Territory (as hereinafter defined), and Nostrum desires to grant such
license to Bionutrics, all on the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises, and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:

Article 1 - Definitions

     The capitalized terms set forth below (whether in the singular or plural)
shall have the meanings indicated for the purposes of this Agreement.

           “Affiliate” means any Person which controls, is controlled by or is
under common control with Bionutrics or Nostrum, as the case may be. The term
“control” means the ownership, directly or indirectly, of more than fifty
percent (50%) of the voting stock or equity interest of the subject Person, or
the right to receive over fifty percent (50%) of the profits or earnings of such
Person. Such other relationship as in fact gives a Person the power or ability
to control the management, business and affairs of the subject Person shall also
be deemed to constitute control.            “FDA” means the United States Food
and Drug Administration or any successor agency of the United States government.
           “Nostrum Technology” means all of Nostrum’s proprietary information,
know-how, materials and technology related to the Products (including without
limitation, manufacturing information) and any related patent applications or
patents owned or controlled by Nostrum or its Affiliates to the extent they
cover the Products or any such information, know-how, materials or technology as
applied to the Products.    

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

           “Person” means any natural person, corporation, unincorporated
organization, partnership, association, joint stock company, joint venture,
limited liability company, trust or government, or any agency or political
subdivision of any government, or any other entity.            “Products” means
four proprietary to be named pharmaceutical canidates that qualify for filing
with the FDA under a “505(b)(2)” application using Nostrum Technology, that have
completed formulation development indicating appropriate functionality.
Bionutrics and Nostrum shall act in good faith in the selection and approval of
these Products, all of which are expected be provided to Bionutrics within the
next six months.            “Territory” means the world.    

Article 2 - Grant of License

     2.1     License Grant. Nostrum hereby grants to Bionutrics, and Bionutrics
accepts, an exclusive license under the Nostrum Technology to develop, make,
have made, use, import, offer for sale, market and sell Products in the
Territory.

     2.2     Retained Rights. Subject to the licenses granted to Bionutrics
hereunder, Nostrum shall remain the sole owner of any Nostrum Technology, which
Nostrum shall have furnished to Bionutrics in connection with the performance of
Nostrum’s obligations pursuant to this Agreement. Nostrum shall retain all
right, title and interest to use or license the Nostrum Technology in connection
with any product, formulation or process except the Products.

     2.3     Development of Other Products/Bionutrics’ Rights.

          (a)     In partial consideration for the payment made by Bionutrics
pursuant to Section 4.1, Bionutrics shall have, for a period of three (3) years
after the Effective Date (the “Option Period”), certain rights as set forth in
Sections 2.3(b) and 2.3(c) with respect to any other products using the Nostrum
Technology which meet all of the following criteria (“New Products”):

           (i)     products with SR-technology for conditions where inflammation
is a significant contributor to, or consequence of, the following conditions:

      1.      Cardiovascular   2.      Hypertension   3.      Diabetes   4.     
Arthritis  

2

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

  5.      Asthma   6.      Prostatic Hyperplasia   7.      Osteoporosis   8.   
  Systemic Lupus   9.      Inflammatory Bowel Diseases   10.      Auto-immune
diseases in general  

          (ii)     products that qualify for filing with the FDA under a
“505(b)(2)” application or a New Drug Application (“NDA”) pursuant to the
federal Food, Drug and Cosmetic Act (the “Act”); and

          (iii)     products that are not generic equivalents to branded
products that qualify for filing with the FDA pursuant to an Abbreviated New
Drug Application under the Act.

     (b)(i)     At the reasonable request of Bionutrics and acceptance by
Nostrum at any time during the Option Period, Nostrum will conduct and complete
formulation development work and pilot studies concerning up to two (2) New
Product annually. Bionutrics shall pay or reimburse Nostrum, as the case may be,
for all costs and expenses which it may incur in connection with such
development work and pilot studies within thirty (30) days following Bionutrics’
receipt of Nostrum’s invoice therefor.

           (ii)     Nostrum hereby grants to Bionutrics the right during the
Option Period to obtain exclusive licenses with respect to any New Products for
which Nostrum has performed formulation development work and completed pilot
pursuant to Section 2.3(b)(1) . Bionutrics shall have a period of sixty (60)
days from its receipt of the results of a successful pilot study with respect to
a New Product in which to notify Nostrum whether Bionutrics desires to exercise
its option to license such New Product. If Bionutrics does exercise its option,
the parties shall in good faith negotiate and enter into a license agreement for
the New Product, which shall contain essentially the same terms as those set
forth in this Agreement as applied to the Products. In the event that Bionutrics
does not exercise its option with respect to a given New Product, Nostrum shall
be free to develop and commercialize such New Product alone or in collaboration
with a third party.

     (c)     In addition to the rights set forth in Section 2.3(b), Bionutrics
shall have the right of first refusal during the Option Period to obtain an
exclusive license to any other New Product developed by Nostrum during the
Option Period in accordance with the following: (x) In the event that Nostrum
shall, at any time during the Option Period, receive a bona fide offer, or
propose to offer, a license to develop, manufacture, market or sell any New
Product, Nostrum shall promptly provide to Bionutrics written notice thereof.
Such notice (“Option Notice”) shall set forth all relevant terms and conditions
of such transaction as contained in the bona fide offer or as proposed by
Nostrum and shall constitute an offer to Bionutrics on such terms and
conditions. Bionutrics shall have 90 days to elect to accept such offer. (y) If
Bionutrics does not elect to accept such offer with respect to such New Product
within the period provided therefor, Nostrum shall be entitled to enter into an
agreement with any third party with respect to such New Product (“Third Party
Agreement”) on the terms and conditions set forth in the Option Notice;
provided, however, that if within the immediately following 30-day period,
Nostrum shall not have entered into a binding Third Party Agreement with respect
to such New Product on the same terms and conditions as set forth in the Option
Notice, such New Product shall again become subject to the provisions of this
Section 2.3(c).

3

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

     2.4     Effectiveness of License, First Refusal Right and Options.
Notwithstanding any other provision of this Agreement, the license grant, right
of first refusal and options provided for in this Article 2 shall not be
effective and binding on any party for any purpose unless and until (i) all
notes and other indebtedness of Bionutrics convertible into common stock of
Bionutrics, in the present unpaid amount of [$1,500,000], shall be paid,
discharged or converted into common stock of Bionutrics; (ii) Bionutrics has
paid or otherwise discharged all indebtedness that is secured by property of
Bionutrics; (iii) Bionutrics shall have received unrestricted and unencumbered
cash from the future issuance and sale of its common stock in the amount of at
least $1,000,000; and (iv) Bionutrics shall have certified in writing to Nostrum
that the events described in clauses (i) through (iv) have occurred.

Article 3-Research Program

     3.1     Nostrum’s Obligations

           (a)     Pursuant to Bionutrics’s written request, Nostrum will
conduct and complete formulation development and pilot studies to establish
in-vivo performance with respect to the Product(s) (the sequence of events in
each case, a “Project”). Prior to the commencement of a Project, the parties
shall develop a written project plan setting forth the subject matter of the
Project and an estimate of the costs and expenses that would be incurred by
Nostrum in connection with the Project. Nostrum shall have the right, in its
sole discretion, to contract with Enem Nostrum Remedies Pvt. Ltd. or any of
their Affiliates or use third-party contractors to conduct the studies and other
work under this Section 3.1.

          (b)     Prior to the termination of the Project, Nostrum shall provide
to Bionutrics access to information and copies of all records relating to the
Project and the results of pilot studies for the Product(s) related thereto.

          (c)     Nostrum will cooperate with Bionutrics in all phases of the
work to be performed under Section 3.2, including, without limitation, the scale
up, any pivotal studies and process validation.

          (d)     Within thirty (30) days of Bionutrics’ receipt of Nostrum’s
invoice therefor, Bionutrics shall pay or reimburse Nostrum for its reasonable
costs and expenses incurred in connection with the performance of the
obligations set forth in this Section 3.1 together with such costs and expenses
that Nostrum may have incurred in connection with any Project agreed upon by the
parties prior to the Effective Date

4

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

     3.2     Bionutrics Obligations.

          (a)     Bionutrics shall be responsible for all work preparatory to,
and necessary for, the performance of any clinical studies for the Product(s).
Bionutrics’s obligation to conduct such studies with respect to any Product
shall be contingent upon the Product’s successful completion of pilot studies as
well as stability testing and successful manufacture and release of finished
product for use in such clinical studies.

          (b)     In the event that clinical studies conducted or arranged for
by Bionutrics demonstrate efficacy and safety for a Product in accordance with
FDA regulations, Bionutrics in cooperation with Nostrum shall prepare, submit
and prosecute a “505(b)(2)” application or an NDA, as the case may be, with the
FDA, and Bionutrics will keep Nostrum fully informed with respect to such
activities. All such applications shall be filed in the name of Bionutrics,
which shall be responsible, at its own expense, for continuing the post-clinical
and stability testing of the Product necessary for the approval thereof and for
obtaining all governmental approvals for the manufacture and commercial sale of
the Product(s) in the Territory. Bionutrics will have full and complete
ownership thereof.

          (c)     Bionutrics shall be responsible for all costs and expenses
incurred by it in connection with the performance of its obligations under this
Section 3.2. Within thirty (30) days of Bionutrics’ receipt of Nostrum’s invoice
therefor, Bionutrics shall pay or reimburse Nostrum for all reasonable costs and
expenses which it may incur in providing assistance to Bionutrics in the
performance of its obligations under this Section 3.2.

     3.3     Diligence. Following Bionutrics’ receipt of FDA approval with
respect to the manufacture and commercial sale of the Product(s) in the United
States, Bionutrics shall use diligent efforts to manufacture, market, distribute
and sell such Product(s).

     3.5     Ownership of Results. Subject to the provisions of Section 9.6, all
data and results obtained or generated by or on behalf of either Nostrum or
Bionutrics in performance of any development activities related to the
Product(s) to be performed pursuant to this Agreement shall be the sole property
of Bionutrics and shall be treated as Bionutrics’ Confidential Information
pursuant to Article 5 hereof.

Article 4 - Payments

     4.1     Nostrum’s Consideration. In partial consideration for the license
and option rights granted to Bionutrics hereunder, Bionutrics shall issue
Nostrum Six Million (6,000,000) shares of its common stock in accordance with
the provisions of a certain Stock Purchase Agreement between the parties dated
as of June 16, 2004 (the “Stock Purchase Agreement”), a copy of which is annexed
hereto as Exhibit 4.1. The terms, conditions, representations and warranties
contained in the Stock Purchase Agreement are incorporated herein by reference.

5

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

     4.2     Board Representation. In further consideration for the license and
option rights granted to Nostrum hereunder, Bionutrics shall use its best
efforts to cause the Board of Directors of Bionutrics (i) to be comprised of at
least three (3) members and (ii) to include at least one nominee of Nostrum;
provided that Nostrum and its Affiliates are beneficial owners as of the record
date for the election of directors of a minimum of two million shares of
Bionutrics’ common stock (adjusted for stock splits, stock dividends,
reclassifications, recapitalizations, combinations and exchanges of shares).

Article 5. Confidentiality.

     5.1     Confidentiality. During the term of this Agreement and for a period
of ten (10) years after its expiration or termination, each party shall maintain
as confidential the Nostrum Technology, any know-how relating to the Product(s),
and any other proprietary, technical or business information received from the
other party pursuant to this Agreement (“Confidential Information”) and shall
only use such Confidential Information in furtherance of this Agreement. Both
parties agree that any employees provided or given access to the other party’s
Confidential Information shall be bound by confidentiality obligations
essentially the same as those set forth herein. The foregoing obligations of
confidentiality and use restrictions shall not apply, however, to the extent
that such Confidential Information:

  (i) was known to the receiving party, as evidenced by its written records,
prior to receipt from the other party;         (ii) is in the public domain at
time of receipt or subsequently enters the public domain through no breach of
this Agreement by the receiving party;         (iii) after the date of receipt
from the disclosing party, is received without secrecy obligations from a third
party with a bona fide right to disclose it without violating any right of the
disclosing party;         (iv) is independently developed by the receiving party
without the aid, application or use of any of the disclosing party’s
Confidential Information (and such independent development can be properly
documented by the receiving party);         (v) is disclosed to governmental or
other regulatory agencies in order to obtain patents or to gain approval to
conduct clinical trials or to market the Product pursuant to this Agreement, but
such disclosure may be only to the extent reasonably necessary to obtain such
patents or authorizations;         (vi) is necessary to be disclosed to agents,
consultants, Affiliates and/or other third parties for the developing, making,
using, selling or importing of Product (or for such third parties to determine
their interest in performing such activities) in accordance with this Agreement
on the condition that such third parties agree to be bound by confidentiality
obligations and use restrictions at least as restrictive as those contained in
this Agreement; or      

6

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

  (vii) is required to be disclosed by law or court order, provided that notice
is promptly delivered to the disclosing party in order to provide the disclosing
party sufficient opportunity to seek a protective order or other similar order
with respect to such Confidential Information and the receiving party thereafter
discloses only the minimum information required to be disclosed in order to
comply with the request, whether or not a protective order or other similar
order is obtained by the disclosing party.      

     5.2     No Publicity; Disclosure of Agreement Terms. Neither party may use
the name of the other party or its Affiliates in any publicity or advertising
without the prior written permission of such party. Notwithstanding the
provisions of Section 5.1 and this Section 5.2, either party may disclose the
terms of this Agreement to the extent necessary to (a) actual or potential
lenders or investors; (b) actual or potential joint venture or merger partners;
(c) the party’s agents, consultants, Affiliates and/or other third parties
necessary to facilitate an actual or potential loan, investment, joint venture
or merger with such parties; or (d) the party’s accountants, consultants and
attorneys, for other corporate transactions and business, on a need to know
basis. Bionutrics may also disclose portions of this License Agreement in an 8-K
or similar disclosure notice, as deemed necessary in its counsel’s judgement, to
meet the reporting requirements of the SEC and other applicable regulations for
reporting public companies.

Article 6 – Patents

     6.1     Infringement and Third Party Licenses.

     (a)     In the event that Bionutrics’, or its Affiliates’ making, having
made, using, offering for sale, selling or importing the Product(s) infringes or
misappropriates, will infringe or misappropriate or is alleged by a third party
to infringe or misappropriate a third party’s patents or other intellectual
property rights, the party hereto becoming aware of same shall promptly notify
the other. The parties shall thereafter attempt to agree upon a course of action
with respect thereto.

     (b)     Bionutrics shall be responsible, at Bionutrics’s expense, for the
defense of any claims, demands, actions or proceedings arising from allegations
that development, making, having made, using, offering for sale, selling or
importing the Product(s) infringes or misappropriates or will infringe or
misappropriate a third party’s patents or other intellectual property rights.
Upon Bionutrics’s request and expense, Nostrum shall cooperate with Bionutrics
in such defense; provided that Bionutrics shall promptly reimburse Nostrum for
reasonable out-of-pocket costs and expenses incurred by Nostrum in providing
such cooperation.

7

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

     6.2     Infringement of Nostrum’s Intellectual Property Rights by a Third
Party. Bionutrics and Nostrum shall promptly notify each other of any
infringement of the patent rights included in the Nostrum Technology as applied
to the Product(s), and/or any misappropriation or unauthorized use of any of the
Nostrum Technology as applied to the Product(s), in the Territory which may come
to their attention. Bionutrics shall have three (3) months to undertake
reasonable efforts to obtain a discontinuance of the aforesaid infringement or
unauthorized use of such patent rights and the Nostrum Technology as applied to
the Product(s), and, if not successful, Bionutrics shall have the option, but is
not required, to bring suit, at Bionutrics’ expense, against such infringer or
unauthorized user. Nostrum may elect to join any such suit initiated by
Bionutrics.

           (c)     If Bionutrics fails or elects not to obtain a discontinuance
of said infringement or unauthorized use and elects not to bring suit against
such third party, then in any such event Bionutrics shall give notice in writing
to Nostrum of its election not to bring suit, within thirty (30) days following
such election, and of the circumstances of such infringement or unauthorized
use, including such evidence of such infringing activities and/or
misappropriation or unauthorized use. Whether or not such notice is received,
Nostrum may, but is not required to (i) obtain a discontinuance of the
infringing operation or unauthorized use; or (ii) bring suit against such third
party after receipt by Nostrum of the aforesaid notice or upon failure of
Bionutrics to obtain a discontinuance. Any such suit or action by Nostrum under
this Section 6.2(c) shall be conducted either in the name of Nostrum, or jointly
in the names of Bionutrics and Nostrum, as may be required by the laws of the
forum. Bionutrics shall, upon request, reasonably cooperate with Nostrum in the
conduct of such suit or action. Nostrum shall be entitled to retain and keep any
damages received, obtained, collected or recovered whether by judgment,
settlement or otherwise, as a result of such suit or action.

Article 7 – Representations and Warranties

     7.1     Representations and Warranties by Both Parties. Each of Bionutrics
and Nostrum hereby represents and warrants to the other party that:

  (i) it is a corporation duly organized and validly existing under the laws of
the state or other jurisdiction of incorporation or formation;         (ii) the
execution, delivery and performance of this Agreement by such party has been
duly authorized by all requisite corporate action;         (iii) it has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder;         (iv) the execution, delivery and
performance by such party of this Agreement and its compliance with the terms
and provisions hereof does not and will not conflict with or result in a breach
of any of the terms and provisions of or constitute a default under (i) a loan
agreement, guaranty, financing agreement, agreement affecting a product or other
agreement or instrument binding or affecting it or its property; (ii) the
provisions of its charter documents or bylaws; or (iii) any order, writ,
injunction or decree of any court or governmental authority entered against it
or by which any of its property is bound;      

8

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

  (v) except for the governmental and regulatory approvals required to market
the Product in the Territory, the execution, delivery and performance of this
Agreement by such party does not require the consent, approval or authorization
of, or notice, declaration, filing or registration with, any governmental or
regulatory authority and the execution, delivery or performance of this
Agreement will not violate any law, rule or regulation applicable to such party;
        (vi) this Agreement constitutes such party’s legal, valid and binding
obligation enforceable against it in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors’ rights and to the availability
of particular remedies under general equity principles; and         (vii) it
shall comply with all applicable material laws, rules and regulations relating
to the performance of its obligations relating to the Product(s) under this
Agreement.      

     7.2     Representations and Warranties by Nostrum. Nostrum hereby
represents and warrants to Bionutrics that:

  (i) it owns all right, title and interest in and to the Nostrum Technology as
applied to the Product(s), free and clear of all liens and other charges and
encumbrances;         (ii) there are no adverse actions, suits or claims pending
against Nostrum or any of its Affiliates in or before any court or governmental
or regulatory authority with respect to the Product and/or the Nostrum
Technology as applied to the Product, and no such actions, suits or claims have
been threatened against Nostrum or any of its Affiliates;         (iii) as of
the Effective Date, to the best of Nostrum’s knowledge, there is no reason
(e.g., debarment under the Federal Food, Drug, and Cosmetic Act) that would
prevent Bionutrics from using data and information supplied by Nostrum, as part
of Bionutrics’s regulatory submissions for the Product.      

     7.3     Representations and Warranties by Bionutrics. Bionutrics hereby
represents and warrants to Nostrum that:

9

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

 

  (i) Bionutrics will immediately undertake to have its financial statements
audited for the years 2002 and 2003 by (Miller, Ellin & Co., LLP of New York,
New York, or other equally qualified certified public accountants); that it will
make the appropriate filings with respect to these audited financial statements
with the Securities and Exchange Commission; that it will file its unaudited but
reviewed quarterly financial statements for 2004; and that the results of these
audited financial statements will not be materially different from the results
set forth in Bionutrics’ unaudited financial statements described in Section 2.5
of the Stock Purchase Agreement for 2002, 2003 and the six month period ending
April 30, 2004 supplied to Nostrum prior to the execution of this Agreement.    
 

     7.4     Continuing Representations. The representations and warranties of
each party contained in Sections 7.1, 7.2 and 7.3 shall survive the execution of
this Agreement.

     7.5     No Inconsistent Agreements. As of the Effective Date, neither Party
has entered into, and during the term of this Agreement, neither party shall
enter into, any oral or written agreement or arrangement that would be
inconsistent with its obligations under this Agreement.

ARTICLE 8 - INDEMNIFICATION

     8.1     Indemnification by Nostrum. Nostrum shall, at its sole cost and
expense, defend, indemnify and hold harmless Bionutrics and its Affiliate(s),
and their respective officers, directors, agents and employees from and against
all claims, liens, demands, damages, liability, actions, causes of action,
losses, judgments, costs and expenses (including, without limitation, reasonable
attorneys’ fees) (collectively “Claim(s)”) to the extent such Claims arise out
of or in connection with, result from, or are caused by: (i) any breach by
Nostrum of its representations or warranties contained in Sections 7.1 or 7.2 of
this Agreement; or (ii) the gross negligence or willful misconduct of Nostrum in
the performance of its obligations under this Agreement; provided, however, that
Nostrum shall have no liability or indemnification obligations hereunder to the
extent any such Claim is caused by the gross negligence or willful misconduct of
Bionutrics, its Affiliates or their respective officers, directors, agents and
employees.

     8.2     Indemnification by Bionutrics. Bionutrics shall, at its sole cost
and expense, defend, indemnify and hold harmless Nostrum and its Affiliate(s),
and their respective officers, directors, agents and employees from and against
all claims, liens, demands, damages, liability, actions, causes of action,
losses, judgments, costs and expenses (including, without limitation, reasonable
attorneys’ fees) (collectively “Claim(s)”) to the extent such Claims arise out
of or in connection with, result from, or are caused by: (i) any breach by
Bionutrics of its representations or warranties contained in Section 7.1 or
Section 7.3 of this Agreement; (ii) the gross negligence or willful misconduct
of Bionutrics or its Affiliates in the performance of its or their obligations
under this Agreement; (iii) the marketing, manufacture, use or sale of the
Product(s) in the Territory by or on behalf of Bionutrics or its Affiliates; or
(iv) allegations that the manufacture, use or sale of the Product(s) in the
Territory by or on behalf of Bionutrics or its Affiliates infringes third party
patents; provided, however, that Bionutrics shall have no liability or
indemnification obligations hereunder to the extent any such Claim is caused by
the gross negligence or willful misconduct of Nostrum, its Affiliates or their
respective officers, directors, agents and employees.

10

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

     8.3     Conditions to Indemnification. The obligations of the indemnifying
party under Articles 8.1 and 8.2 are conditioned upon the delivery of written
notice to the indemnifying party of any potential Claim promptly after the
indemnified party becomes aware of such potential Claim. The foregoing
notwithstanding, the parties acknowledge and agree that failure of the
indemnified party to promptly notify the indemnifying party of a potential Claim
shall not constitute a waiver of, or result in the loss of, such party’s right
to indemnification under Articles 8.1 or 8.2, as appropriate, except to the
extent that the indemnifying party’s rights, and/or its ability to defend
against such liability are materially prejudiced by such failure to notify. The
indemnifying party is hereby authorized to carry out the sole management and
defense of such potential Claim, and shall have the right to assume the defense
of any suit or claim related to the Claim if it has assumed responsibility for
the Claim in writing. However, if in the reasonable judgment of the indemnified
party, such Claim involves an issue or matter which could have a materially
adverse effect on the business operations or assets of the indemnified party,
the indemnified party may waive its rights to indemnity under this Agreement and
control the defense or settlement thereof. If the indemnifying party defends the
suit or claim, the indemnified party may participate in (but not control) the
defense thereof at its sole cost and expense.

     8.5     Limitation of Liability. With respect to any claim by one party
against the other arising out of the performance or failure of performance of
the other party under this Agreement, the parties expressly agree that the
liability of such party to the other party for such breach shall be limited
under this Agreement or otherwise at law or equity to compensatory damages only
and in no event shall a party be liable for punitive or exemplary damages. The
foregoing limitation will not prevent a party entitled to indemnification
pursuant to this Agreement from recovering all components of any judgment or
award against such a party by an unaffiliated party.

Article 9 - Term and Termination

     9.1     Term and Expiration. The term of this Agreement shall be separably
applicable to each Project and the Product related thereto and unless otherwise
provided in Section 2.4, shall commence as of the Effective Date and, unless
sooner terminated pursuant to this Article 9, shall continue in effect for as
long as Bionutrics is marketing any Product.

11

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

     9.2     Rights of Bionutrics to Terminate.

       (a)     Pursuant to the terms of Section 3, Bionutrics may, upon written
notice, terminate this Agreement with respect to a Project and the Product
related thereto;            (b)     Bionutrics may, upon written notice,
terminate this Agreement with respect to a Project and the Product related
thereto in the event that (i) Bionutrics reasonably believes that use of any
portion of the Nostrum Technology as applied to such Product pursuant to the
license granted in Section 2 hereof would infringe any patent, copyright,
trademark or other intellectual property right of a third party or
misappropriate any trade secret of a third party; or (ii) the Product loses
substantially all of its commercial value for Bionutrics, due to: (a) expected
extraordinary competition or direct competition, or (b) decrease in sales of any
corresponding product in the Territory based on International Marketing Service
data or equivalent data relating to the market for the Product in the Territory.
   

     9.3     Rights of Nostrum to Terminate. Nostrum may, upon written notice,
terminate this Agreement or any Project(s) and Product(s) thereunder in the
event that any of the following conditions did not exist as of the 120th day
following the Effective Date: (i) Bionutrics has no unpaid or undischarged notes
or other indebtedness that is convertible into common stock of Bionutrics; (ii)
Bionutrics has no indebtedness that is secured by property of Bionutrics; (iii)
Bionutrics has obtained agreement and signatures per a Lock-Up Agreement
(Attachment A hereto) from the Company’s shareholders constituting a minimum
13,500,000 shares of the Company’s outstanding common stock (including the
common stock issued in this transaction; (iv) Bionutrics has closed and received
in a private placement of its common stock unrestricted and unencumbered cash in
the amount of at least $1,000,000; and (v) Bionutrics has certified in writing
to Nostrum that the events described in clauses (i) through (iv) have occurred.

     9.4     Termination for Cause. Either party shall have the right to
terminate this Agreement in the event the other party breaches any material
covenant, representation or warranty of this Agreement or the Stock Purchase
Agreement and fails to cure such breach within sixty (60) days following written
notice of such breach.

     9.5     Bankruptcy or Insolvency. Either party shall be entitled to
immediately terminate this Agreement upon the filing or institution of
bankruptcy, reorganization (in connection with any insolvency), liquidation or
receivership proceedings, or upon an assignment of a substantial portion of the
assets for the benefit of creditors by the other party, or in the event a
receiver or custodian is appointed for such other party’s business, or if a
substantial portion of such other party’s business is subject to attachment or
similar process; provided, however, that in the case of any involuntary
bankruptcy proceeding or the attachment of a substantial portion of a party’s
assets such right to terminate shall only become effective if the proceeding or
attachment is not dismissed within sixty (60) days after the filing thereof.

12

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

     9.6     Effect of Termination.

          (a)     In the event that this Agreement and all Projects and Products
thereunder are terminated by Nostrum pursuant to Section 9.3:

       (i)     the license, right of first refusal and options granted to
Bionutrics under Article 2 hereof shall terminate, Bionutrics shall transfer to
Nostrum all of the formulations, processes and other technology, approvals,
applications and records related to the development and commercialization of the
Products, and Nostrum shall thereafter have the right to develop, manufacture
and otherwise commercialize the Products in the Territory; and      
     (ii)     the Stock Purchase Agreement shall be rescinded, and the shares of
Bionutrics issued to Nostrum thereunder shall be returned to Bionutrics for
cancellation.    

          (b)     In the event that this Agreement is terminated with respect to
less than all of the Projects and Products hereunder, (i) the license granted to
Bionutrics under Section 2.1 shall terminate with respect to the Product(s) that
are the subject of such termination; (ii) Bionutrics shall transfer to Nostrum
all of (a) the formulations, processes and other technology relating to such
Products(s); (b) the approvals and applications (except those relating to any
NDA or “505(b)(2)”) for such Products, and (c) the records directly related to
the development and commercialization of such Product(s) and the related
Product(s); and (iii) Nostrum shall thereafter have the right to develop,
manufacture and otherwise commercialize such Product(s) in the Territory.

     9.7     Surviving Terms. The provisions of Section 9.6, and of Articles 5,
8 and 11 and such other provisions of this Agreement which by their expressed
terms are to be performed or complied with subsequent to the termination or
expiration of this Agreement, shall survive such termination or expiration and
shall continue in full force and effect in accordance with their respective
terms.

Article 10. Force Majeure

          (a)     No failure or omission by the parties in the performance of
any obligation according to this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from any cause or
causes beyond the control of the party, including, but not limited to, strikes,
riots, war, acts of God, invasion, fire, explosion, floods, delay of carrier,
energy shortages and acts of government or governmental agencies or
instrumentalities.

13

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

Article 11 - Miscellaneous

     11.1     No Waiver. No failure by a party to exercise any rights hereunder
in the event of a breach or violation hereof by the other party shall constitute
a waiver of any such rights. No waiver by any party of any breach or violation
hereof by the other party, shall constitute a waiver of any rights in respect of
any other or subsequent breach or violation.

     11.2     Notices. All notices given under this Agreement shall be in
writing and given by personal delivery, confirmed facsimile transmission,
nationally recognized overnight courier (prepaid) or registered or certified
mail, postage prepaid with return receipt requested. Notices shall be addressed:

          if to Nostrum, at

               203 Somerset Court
               Princeton, New Jersey 08540
               Attn: Nirmal Mulye, Ph.D.
               Fax: (732) 355-1271

         if to Bionutrics, at

               2415 East Camelback Road
               Suite 700
               Phoenix, Arizona 85022
               Attn.: Ronald Howard Lane, Ph.D.
               Fax: (602) 508-0115

A party may change its address by written notice in accordance with this Section
11.3.

     11.3     Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflict of laws provisions thereof.

     11.4     Independent Contractor. The parties shall be considered
independent contractors, and neither the making of this Agreement nor the
performance of any of the provisions hereof shall be construed to make either
party an agent, employee or legal representative of the other, nor shall this
Agreement be deemed to establish a joint venture or partnership.

     11.5     Severability. Should any section, or portion thereof, of this
Agreement be held invalid by reason of any law, statute or regulation existing
now or in the future in any jurisdiction by any court of competent authority or
by a legally enforceable directive of any governmental body, then such section
or portion thereof shall be validly reformed so as to approximate the intent of
the parties as nearly as possible and, if unreformable, shall be deemed
divisible and deleted with respect to such jurisdiction and this Agreement shall
not otherwise be affected.

14

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

     11.6     Effect of Assignment. This Agreement shall be binding upon, and
inure to the benefit of, each party and its permitted successors and permitted
assigns. Each party shall be responsible for the compliance by any of its
permitted assignees with the terms and conditions of this Agreement.

     11.7     Recording. Each party shall have the right, at any time, to
record, register, or otherwise notify this Agreement in appropriate governmental
or regulatory offices anywhere in the Territory, and Nostrum or Bionutrics, as
the case may be, shall provide reasonable assistance to the other in effecting
such recording, registering or notifying.

     11.8     Further Actions. Each party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

     11.9     Counterparts. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto and is delivered to the other party in
accordance with Section 11.3. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against either party whose
signature appears thereon, but all of which taken together shall constitute but
one and the same instrument.

     11.10     Entire Agreement. This Agreement, together with the attached
exhibit , represents the entire agreement between the parties with respect to
the subject matter hereof and supersedes and replaces all prior agreements and
understandings, whether written or oral. No terms or provisions of this
Agreement shall be varied or modified and no subsequent alteration, amendment,
change or addition to this Agreement shall be binding upon the parties unless
reduced to writing and signed by an authorized officer of each party.

     11.11.     Dispute Resolution.

               (i) Procedures Mandatory. The parties agree that any dispute
arising out of or relating to this Agreement shall be resolved solely by means
of the procedures set forth in this Section 11.11 and that such procedures
constitute legally binding obligations that are an essential provision of this
Agreement; provided, however, that all procedures and deadlines specified in
this Section may be modified by written agreement of the parties..

               (ii) Dispute Resolution Procedures.

          (a)     Negotiation. In the event of any claim, controversy or dispute
arising out of or relating to this Agreement, or the breach thereof, either
party shall notify the other party, and the parties shall attempt in good faith
to resolve the matter within thirty (20) days after the date of such notice (the
"Dispute Notice Date").

15

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

          (b)     Mediation. If the matter remains unresolved within forty-five
(45) days after the Dispute Notice Date, either party may initiate mediation
upon written notice to the other party, whereupon both parties shall be
obligated to engage in a mediation proceeding administered and conducted by the
American Arbitration Association (“AAA”) in New York City under its Commercial
Mediation Rules, except that specific provisions of this Section shall override
inconsistent provisions of the AAA Commercial Mediation Rules. The parties shall
attempt to resolve the dispute through mediation until one of the following
occurs: (i) the parties reach a written settlement; (ii) the mediator notifies
the parties in writing that they have reached an impasse; (iii) the parties
agree in writing that they have reached an impasse; or (iv) the parties have not
reached a settlement within ninety (90) days after the Dispute Notice Date.

          (c)     If and to the extent that the parties fail to resolve the
dispute through mediation, or if neither party elects to initiate mediation,
then all such claims, controversies and disputes shall be settled by arbitration
administered and conducted by the AAA in New York City under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s)
therein may be entered in any court having jurisdiction thereof.

          (iii)     Preservation of Rights Pending Resolution.

               (a)     Performance to Continue. Each party shall continue to
perform its obligations under this Agreement pending final resolution of any
dispute arising out or relating to this Agreement; provided, however, that a
party may suspend performance of its obligations during any period in which the
other party fails or refuses to perform its obligations.

               (b)     Provisional Remedies. Although the procedures specified
in this Section 11.11 are the sole and exclusive procedures for the resolution
of disputes arising out of relating to this Agreement, either party may seek a
preliminary injunction or other provisional equitable relief if, in its
reasonable judgment, such action is necessary to avoid irreparable harm to
itself or to preserve its rights under this Agreement.

                (c)     Statute of Limitations. The parties agree that all
applicable statutes of limitation and time-based defenses (such as estoppel and
laches) shall be tolled while the procedures set forth in this Section 11.11 are
pending. The parties shall take any actions necessary to effectuate this result.

16

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

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.

 

NOSTRUM PHARMACEUTICALS, INC.    BIONUTRICS, INC.      By: /s/ Nirmal Mulye,
Ph.D.    By: /s/ Ronald Howard Lane, Ph.D.  Name: Nirmal Mulye, Ph.D.    Name:
Ronald Howard Lane, Ph.D.  Title: President    Title: President 

17

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