Exhibit 10.3

                    EMPLOYMENT AGREEMENT WITH JOSEPH SCHWARZ

     EMPLOYMENT AGREEMENT  ("Agreement") made and entered into as of the 1st day
of July, 2000 by and between AlphaRx Inc., a Delaware  corporation  ("Company"),
and Joseph Schwarz ("Executive").

     WHEREAS,  Company  desires to employ  Executive as its Chief  Scientist and
Executive  desires to be  employed  by  Company,  upon the terms and  conditions
hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth and the  mutual  benefits  to be derived  herefrom,  and  intending  to be
legally bound hereby, the Company and the Executive agree as follows:

1.     EMPLOYMENT  AND TERM.  Company  hereby  employs  Executive  and Executive
       hereby  accepts  employment  for a term  commencing on July 1st, 2000 and
       continuing  until June 30th, 2003,  unless sooner  terminated as provided
       for  in  this  Agreement.  Company  and  Executive  have  the  option  to
       renegotiate this Agreement beyond the three-year period. Executive hereby
       warrants  and  represents  to Company  that he is free to enter into this
       Agreement and is not a party to any agreement,  written or otherwise,  or
       bound by any restrictions, which limit or restrict him from entering into
       this  Agreement or performing the services,  duties and  responsibilities
       called for hereunder.

2.     DUTIES.

2.1    Executive  shall perform the duties of the Chief Scientist of the Company
       and such additional executive duties of Company and its affiliates as may
       be,  from  time to  time,  requested  of him by the  Company's  Board  of
       Directors or the Chairman,  President  and/or Chief Executive  Officer of
       the Company.

2.2    Executive shall devote his full professional time and best efforts to the
       performance of his duties and  responsibilities  hereunder to advance the
       interests of the Company and shall not during the term of this  Agreement
       (as  defined in  Section 1 hereof) be  employed,  involved  or  otherwise
       engaged in, either directly or indirectly, any other employment for gain,
       profit or other  pecuniary  advantage,  without prior written  consent of
       Company. At no time shall Executive engage in any activity that conflicts
       with the business of the Company or its affiliates.  Nothing set forth in
       this section 2.2 shall be construed to prevent  Executive from (i) acting
       as a member of Board of Trustees or a member of Board of Directors of any
       other  corporation,  or as a  member  of the  Board  of  Trustees  of any
       organization  or entity which is not a competitor  of the Company or (ii)
       devoting of such of  Executive's  time and  attention  to  philanthropic,
       charitable,   civic,  community  or  other  activities  or  endeavors  as
       Executive  shall  reasonably  determine  but  only  to  the  extent  that
       Executive's  pursuance of any activities or endeavors does not materially
       and adversely effect the Executive's ability to

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       perform and discharge  Executive's  duties and  objectives to the Company
       hereunder.

2.3    Except for required travel on Company  business,  Executive shall perform
       his duties and  responsibilities  at the  Company's  principal  executive
       offices  located in the greater  Toronto area.  The Company shall furnish
       Executive with office space, secretarial assistance, a personal computer,
       and  such  other   facilities  and  services  as  shall  be  suitable  to
       Executive's  position  and  adequate  for the  performance  of his duties
       hereunder.

3.     COMPENSATION.  For all duties and responsibilities to be performed and/or
       assumed by Executive hereunder, Executive shall be entitled to receive an
       annual salary as set forth below ("Base Salary").  The Base Salary,  less
       any sums  required  to be  withheld  by law,  shall be  payable  in equal
       monthly  installments or such other more frequent regular installments as
       the Company may, from time to time, determine.  For purposes hereof, Base
       Salary shall be:

3.1    For the  twelve-month  period  commencing with the date hereof,  the Base
       Salary  shall be $24,000 per year which shall be increased to $96,000 per
       year after the first six months of employment.

3.2    For each year thereafter, the Base Salary shall be increased by an amount
       determined  by the Board of Directors  but in no event less than (i) five
       percent (5%) after the first year, six percent (6%) after the second year
       and each year thereafter  upon mutual  agreement to extend the term. Each
       percentage  increase  for a  particular  year  shall be based on the Base
       Salary for the immediately preceding year.

4.     FRINGE  BENEFITS.  Company  shall pay for or provide  Executive  with the
       following benefits:

4.1    For the first  year,  Executive  shall be  entitled to two (2) weeks paid
       vacation to be used at the Executive's discretion.  Thereafter, Executive
       shall be entitled to three (3) weeks paid vacation  during each full year
       of this Agreement to be used at the Executives discretion.  Vacation time
       shall accrue on a pro-rata basis during each year of this Agreement.  Any
       unused  vacation  shall  not be  cumulative  from  year  to  year  unless
       otherwise agreed upon by the parties.

4.2    Such other  employee  benefits  maintained  by the Company for its senior
       executives and key management employees,  including,  all pension, profit
       sharing,  retirement,  stock bonus and stock option plans,  to the extent
       Executive is eligible to participate pursuant to the terms and conditions
       of such plans.

4.3    Executive shall be reimbursed in a timely manner for all items of travel,
       entertainment  and  miscellaneous  expenses  which  Executive  reasonably
       incurs  in  connection  with the  performance  of his  duties  hereunder,
       provided that the Executive  submits to the Company such  statements  and
       other  evidence  supporting  said  expenses as the Company my  reasonably
       require. Executive, when traveling

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       on Company  business,  shall be  permitted  to fly  economy  class on all
       domestic and international flights.

5.     STOCK OPTIONS.

5.1    As  part  of  Executive's   compensation  for  services  to  be  rendered
       hereunder,  Executive  shall have the right and option to  purchase  from
       Company  voting common stock in Company  ("Option").  The total number of
       shares  available to Executive  under this Option is One Hundred & Twenty
       Five Thousand  Shares  (125,000) at a purchase price of Ten Cents ($0.10)
       per share ("Option Shares"). The Option Shares are available for purchase
       in  installments as listed in Column A below and each  installment  shall
       become vested on the corresponding date listed in Column B, as follows:

     Column A              Column B
     Number of Shares      Date Option Shares Available for Purchase
                           Become Vested

     31,250                Upon the commencement of Executive's employment
                           pursuant to the terms of this Agreement

     31,250                First anniversary date of this Agreement

     31,250                Second anniversary date of this Agreement

     31,250                Third Anniversary date of this Agreement

In order for the Option Shares to become vested as provided for above, Executive
must be  employed  by the Company  under the terms of this  Agreement  as of the
vesting date set forth in Column B above.

5.2    Except as otherwise  provided for below,  the term of the Option  granted
       shall  remain in effect  for five (5) years  from the date on which  such
       Option Shares  become  vested.  If the  Executive's  employment  with the
       Company is terminated by the Company for Cause (as defined  herein) or by
       the act of Executive,  the  Executive's  right to exercise  vested Option
       Shares  shall cease and become  null and void within  thirty (30) days of
       the date employment  terminated,  except as otherwise provided in Section
       5.3 hereof.  All unvested Option Shares will terminate  immediately as of
       the date of such  termination  of  employment.  In the event the  Company
       receives,  accepts  and  consummates  a  tender  offer  for  all  of  its
       outstanding  common stock prior to the vesting of the Option Shares,  the
       vesting rights shall be accelerated so as to allow  Executive to exercise
       the Option to purchase all of the Option Shares  immediately prior to the
       consummation of such tender offer.

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5.3    Notwithstanding  anything  in  this  Section  5 to the  contrary,  if the
       Executive's  employment is terminated for Cause,  as set forth in Section
       6.3,  the Company  shall have the right to  terminate  and  withdraw  any
       vested or unvested Options under this Agreement.

5.4    The  purchase  price of the Option  Shares shall be paid in full upon the
       exercise  of the  Option,  and  Company  shall not be required to deliver
       certificates  for such Option  Shares  until  payment  has been made.  In
       addition  to, and at the time of payment of the  purchase  price for such
       Option Shares,  Executive  shall be responsible for all federal and state
       withholding or other employment taxes applicable to the taxable income of
       such  Executive  and any other fees  resulting  from the  exercise of the
       Executive.

5.5    Each share of Option Stock  purchased  pursuant to the terms hereof shall
       carry  all  appropriate  registration  and/or  restrictions  on sale  and
       notices as determined from time to time by Company's  securities counsel.
       Executive shall cooperate with Company and Company's counsel in complying
       with all applicable securities laws.

6.     TERMINATION  OF  EMPLOYMENT.  The  employment  of Executive and Company's
       liability and obligations hereunder shall terminate as follows:

6.1    This Agreement shall terminate  immediately  upon the death of Executive.
       In  such  event,  Company  shall  pay to such  person  as  Executive  may
       designate  in a written  notice  filed  with the  Company,  or if no such
       person  shall be  designated,  to  Executive's  estate,  a lump sum death
       benefit in an amount equal to two (2) months of  Executive's  Base Salary
       as in effect on the date of  Executive's  death and double  indemnity  in
       event Executive's death occurs while traveling on Company business.

6.2    This  Agreement  shall  terminate  immediately  upon  the  Disability  of
       Executive.  Disability  shall  exist  if  due  to a  mental  or  physical
       condition, Executive is determined to be unable to perform his duties and
       responsibilities  hereunder  for a  continuous  period of two (2) months.
       Disability shall be conclusively  established by written certification by
       two (2) licensed,  disinterested  physicians  selected as mutually agreed
       upon between  Company and Executive.  In the event the two (2) physicians
       disagree,  a third  physician  shall be selected by the two physicians to
       break  such  impasse.  The costs  associated  with the  determination  of
       Disability  shall be borne equally between Company and Executive.  In the
       event of  Disability,  Executive  shall be  entitled  to receive his Base
       Salary  in  accordance  with  Section  3 for a period  of two (2)  months
       following the onset of Disability.

6.3    The Company may discharge the Executive for Cause and thereby immediately
       terminate  his  employment  under this  Agreement.  For  purposes of this
       Agreement,  Company  shall have  "Cause"  to  terminate  the  Executive's
       employment if the Executive, in the reasonable judgment of the Company:

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6.3.1  Willfully  fails to perform any  reasonable  directive  of the  Company's
       Board of Directors, Chairman or Chief Executive Officer.

6.3.2  Materially  breaches any of the agreements,  duties,  responsibilities or
       obligations under this Agreement.

6.3.3  Embezzles or converts to his own use any funds or property of the Company
       or any client or customer of the Company.

6.3.4  Is convicted of a felony or any crime involving larceny,  embezzlement or
       moral turpitude.

6.4    In the event that  Executive's  employment  is  terminated by the Company
       without Cause, as defined in Section 6.3, above,  for a reason other than
       death or  Disability,  or Executive  shall resign for "Good  Reason",  as
       defined below, then, in such event:

6.4.1  Executive's Base Salary, as defined in Section 3 as then in effect, shall
       continue to be paid for a period of one (1) month ("Payment Period").

6.4.2  Company  shall  maintain  in effect  during the Payment  Period,  for the
       continued benefit of the Executive, all of the employee benefit plans and
       programs in which the Executive was entitled to  participate  immediately
       prior to the Executive's  termination provided same is possible under the
       general  terms  and  provisions  of  such  benefit  plans  and  programs.
       Moreover,  during  the  Payment  Period the  Company  shall  provide  the
       Executive with such reasonable  administrative  and  secretarial  support
       services as may be necessary or appropriate in order to assist  Executive
       in finding  new  employment  or  Executive  may  select an  out-placement
       service  to be  paid  for by the  Company  at a cost  not to  exceed  One
       Thousand Dollars ($1,000).

       For purposes of this Section 6.4, "Good Reason" shall mean:

       (i)    An assignment to the Executive of any duties inconsistent with, or
              a  material  change  in  the  nature  or  scope  of,   Executive's
              responsibilities, authority or duties hereunder.

       (ii)   Failure  by the  Company  to comply  with the  provisions  of this
              Agreement.

       (iii)  Ill health of  Executive  or a member of his family,  or any other
              compelling  personal  circumstance which, in the mutual discretion
              of the  Executive,  and the  Chairman  of the  Company  makes  the
              Executive's   continued   employment  hereunder   impossible,   or
              inappropriate.

6.5    Executive may voluntarily  terminate his employment  under this Agreement
       without  Good  Reason,  as defined in  Section  6.4 above,  by giving the
       Company  ninety  (90) days prior  written  notice  thereof,  and upon the
       expiration of such ninety (90) day period,  Executive's  employment under
       this  Agreement  shall

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       terminate,  and Company shall have no further  obligation or  liabilities
       under this  Agreement  except to pay the Executive  the portion,  if any,
       that  remains  unpaid of the Base  Salary  and  unpaid  accrued  prorated
       vacation  for the period up to the date of  termination.  Resignation  as
       defined herein must be in written form to the Board, witnessed and signed
       by the Executive.

7.     SURRENDER OF BOOKS AND RECORDS.  Executive  acknowledges  that all lists,
       books,  records,  literature,  products and any other  materials owned by
       Company or its affiliates or used by them in connection  with the conduct
       of their business,  shall at all times remain the property of Company and
       its  affiliates  and  that  upon  termination  of  employment  hereunder,
       irrespective of the time, manner or cause of said termination,  Executive
       will  surrender  to Company and its  affiliates  all such  lists,  books,
       records, literature, products and other materials.

8.     CONFIDENTIAL  INFORMATION.  Executive  acknowledges that the confidential
       and  proprietary  information  and data (which shall mean  information or
       data not known or  generally  available  to the  public)  obtained by him
       during the course of his  performance  under this  Agreement (or his work
       prior  to the date  hereof  for the  Company)  concerning  the  Company's
       business,   affairs,   products,   inventions,   processes,   techniques,
       equipment,   machinery,   apparatus,   business   operations,   technical
       information, drawings, specifications, materials, know how, and the like,
       and any  knowledge or  information  developed by Executive as a result of
       performing   Services   hereunder   (collectively   referred  to  as  the
       "CONFIDENTIAL  INFORMATION"),  are all the sole  property of the Company.
       Executive agrees to hold all  Confidential  Information in confidence and
       not to  disclose  the same,  without  the prior  written  consent  of the
       Company,  to anyone for any reason at any time (unless so required by law
       or legal process, and then only after written notice to the Company and a
       reasonable  opportunity  for the Company to challenge,  at its cost, such
       disclosure).  Executive shall not, directly or indirectly,  use or permit
       the use of any  Confidential  Information  for any  purpose,  other  than
       performing  the  Services  hereunder,  without  the  written  consent  of
       Company.  Executive  shall use his best  efforts to prevent  publication,
       disclosure or other use or transmission of any Confidential  Information.
       Upon the  termination  or  expiration  of this  Agreement,  or earlier if
       requested by the Company,  Executive  agrees to return to the Company all
       Confidential  Information in the  possession of Executive,  regardless of
       the form of such Confidential Information.

9.     INTELLECTUAL PROPERTY RIGHTS.

       (a)    Without  limiting the Company's  rights  arising by law or custom,
              Executive acknowledges that the Company shall exclusively own, and
              Executive hereby assigns,  transfers,  and conveys to the Company,
              all discoveries,  work product,  trademarks,  service marks, trade
              names,   brand   names,    software,    copyrights,    inventions,
              improvements,  patents  and  other  intellectual  property  rights
              produced, created, developed or conceived by Executive prior to or
              during  the  Term  of  this  Agreement,

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              whether registered or unregistered,  which relate to the Company's
              business  (collectively,   the  "INTELLECTUAL  PROPERTY  RIGHTS").
              Executive shall disclose all such Intellectual  Property Rights to
              the  Company,  and  Executive  agrees to execute  and  deliver all
              documents  required  by the  Company to  document  or perfect  the
              Company's exclusive ownership of the Intellectual Property Rights.

       (b)    Executive further agrees that all copyrightable works developed by
              the Executive, either alone or with others, prior to or during the
              Term of this  Agreement,  which relate in any way to the Company's
              business,  shall be  considered  to be works made for hire and the
              ownership  of and  the  copyrights  to  such  works  shall  be the
              exclusive  property of the Company.  Executive  shall disclose all
              such works to the  Company,  and  Executive  agrees to execute and
              deliver  all  documents  required  by the  Company to  document or
              perfect the Company's exclusive ownership of such works.

       (c)    Upon the termination or expiration of this  Agreement,  or earlier
              if  requested by the  Company,  Executive  agrees to return to the
              Company all tangible  (including  electronic  storage) elements of
              the  Intellectual  Property  Rights and works in the possession of
              Executive,  regardless of the form of such  Intellectual  Property
              Rights and works.

       (d)    Notwithstanding the foregoing, the provisions of Section 9(a) does
              not  apply  to any  Intellectual  Property  Rights  for  which  no
              equipment,  supplies,  facility  or trade  secret  information  of
              Company was used and which was developed  entirely on  Executive's
              own time, and which does not relate to the business of the Company
              or to the Company's  actual or demonstrably  anticipated  business
              activities.

10.    NONCOMPETITION  COVENANT.  Executive hereby agrees that,  during the Term
       and for a  period  of two (2)  years  thereafter,  Executive  shall  not,
       directly or indirectly,  own, manage,  operate,  control, be employed by,
       act as an advisor or consultant  to, or  participate  in, the  ownership,
       management,  operation,  or control of any business involving the design,
       development,  manufacture,  distribution or sale (whether at wholesale or
       retail) of drug delivery  technology or otherwise in competition with the
       businesses  of  the  Company,  as  now  or  hereafter  conducted,  in any
       geographic  market served by the Company during the  restriction  period;
       provided,  however, that nothing contained in this Section shall prohibit
       the Executive from owning stock in a publicly  traded company which is in
       competition  with the Company  provided  Executive's  aggregate  holdings
       therein do not exceed one percent  (1%) of the  capital of such  company.
       The   provisions  of  this  Section  shall  survive  the   expiration  or
       termination of this Agreement.

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11.    MISCELLANEOUS.

11.1   Any notice,  demand or  communication  required or  permitted  under this
       Agreement  shall be in writing  and shall be  sufficient  when  delivered
       personally,  or three (3) days after  mailing by  registered or certified
       mail,  return  receipt  requested,  or the next day if sent by nationally
       recognized overnight courier with proof of delivery, in each case postage
       prepaid, addressed as follows:

       If to the Company:
       AlphaRx Inc.
       75 East Beaver Creek, Unit 10
       Richmond Hill, Ontario L4B 1B8
       Attn.: Michael M. Lee, President

       If to the Executive:
       Joseph Schwarz
       510-6020 Bathurst Street
       Toronto, Ontario M2R 1Z8

The  foregoing  addressees  may be  changed  at any time by notice  given in the
manner herein provided.

11.2   This Agreement constitutes the entire understanding and agreement between
       Company and Executive  regarding its subject  matter and  supersedes  all
       prior negotiations and agreements,  whether oral or written, between them
       with respect to its subject  matter.  This  Agreement may not be modified
       except by a written agreement signed by the Executive and the Company.

11.3   This  Agreement  shall be  binding  upon and inure to the  benefit of the
       parties and their respective  heirs,  executors,  successors and assigns,
       except that this Agreement may not be assigned by the Executive.

11.4   No waiver by either party of any  condition or of the breach by the other
       of any term or covenant  contained in this Agreement,  whether by conduct
       or otherwise,  in any one or more instances  shall be deemed or construed
       as a further or  continuing  waiver of any such  condition or breach or a
       waiver  of any  other  condition,  or the  breach  of any  other  term or
       covenant  set forth in this  Agreement.  Moreover,  the failure of either
       party to exercise any right  hereunder  shall not bar the later  exercise
       thereof.

11.5   This  Agreement  shall be governed by the statutes and common laws of the
       State of Delaware, excluding its choice of law statutes or common law.

11.6   The headings of the various  sections and  paragraphs  have been included
       herein for  convenience  only and shall not be construed in  interpreting
       this Agreement.

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11.7   If  any   provision   of  this   Agreement   shall  be  held  invalid  or
       unenforceable,  the  remainder  of this  Agreement  shall,  nevertheless,
       remain in full force and  effect.  If any  provision  is held  invalid or
       unenforceable  with  respect  to  particular  circumstances,   it  shall,
       nevertheless, remain in full force and effect in all other circumstances.

11.8   This  Agreement  may be executed in several  counterparts,  each of which
       shall  be  deemed  to be an  original  but  all of  which  together  will
       constitute one and the same instrument.

     IN WITNESS  WHEREOF,  this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized  officer on the date first above
written.

ALPHARX INC.

By: /s/ Sandro Persia                   By: /s/ Michael M. Lee
    --------------------------              ---------------------------
    Sandro Persia                           Michael M. Lee
    Secretary                               Chairman/CEO


EXECUTIVE

By: /s/Joseph Schwarz
    -------------------------
    Joseph Schwarz

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