<PAGE>
                                                                   EXHIBIT 10.35

DATED                                                                       2002






                   (1) BOOTS HEALTHCARE INTERNATIONAL LIMITED





                                       AND





                       (2) BIOPROGRESS TECHNOLOGY LIMITED






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                     PRODUCT DEVELOPMENT AGREEMENT (STAGE 1)

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                                LEGAL DEPARTMENT
                              THE BOOTS COMPANY PLC
                                   NOTTINGHAM
                                     NG2 3AA

                              TEL : (0115) 959 3432
                              FAX : (0115) 959 3314



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                                      INDEX


<TABLE>
<S>   <C>                                                                     <C>
1.    Definitions and Interpretation.......................................... 1

2.    The Initial Development Programme....................................... 4

3.    Intellectual Property Rights............................................ 7

4.    After Completion of the Initial Development Programme...................11

5.    Exclusivity.............................................................16

6.    Confidentiality.........................................................17

7.    Force Majeure...........................................................18

8.    Termination.............................................................19

9.    Assignment..............................................................20

10.   Change of Control.......................................................20

11.   Relationship............................................................21

12.   Waiver..................................................................21

13.   Notices.................................................................21

14.   Entire Agreement and Amendments.........................................23

15.   Applicable Law and Service of Process...................................23

16.   Invalidity and Severability.............................................24

17.   Announcements...........................................................24
</TABLE>


SCHEDULES

1.       Initial Development Programme

2.       Matters to be provided for or taken into account in any commercial
         terms agreed pursuant to Clause 4.4

3.       The Patents

<PAGE>


THIS AGREEMENT is made          day of                                      2002


BETWEEN:-


(1)      BOOTS HEALTHCARE INTERNATIONAL LIMITED (registered in England number
         2741587) whose registered office is at 1 Thane Road West Nottingham NG2
         3AA (hereinafter referred to as "Boots") of the one part; and


(2)      BIOPROGRESS TECHNOLOGY LIMITED whose registered office is at Unit 1,
         Norwood Road, March, Cambridgeshire PE15 8QD (hereinafter referred to
         as "BioProgress") of the other part.


WHEREAS:-

A.       BioProgress has developed certain proprietary technology relating to
         the dose delivery and manufacture of pharmaceutical products in the
         form

B.       Boots and BioProgress have agreed to collaborate in a Product
         Development Programme, the purpose of which is to determine the
         feasibility of the formulation and manufacture of medicinal products in
         this new dosage form and containing XXXXXX as an active ingredient and,
         subject to the successful determination of such feasibility, to enter
         into further negotiations relating to the commercial development of
         such products in this form as Boots may require, on the terms and
         conditions set out below.


NOW IT IS HEREBY AGREED as follows:-

1.       DEFINITIONS AND INTERPRETATION

1.1      In this Agreement, unless the context otherwise requires, the following
         expressions have the following meanings: -




                                       1
<PAGE>

"Affiliate"         means, in relation to any company, any legal entity
                    controlling, controlled by or under common control with the
                    company in question. For this purpose, "control" means
                    direct or indirect possession of the power to direct or
                    cause the direction of the management or policies of such
                    company or entity, whether pursuant to the ownership of
                    voting securities, by contract or otherwise;
"Commercial
Development
Programme"          means a programme for the development on a commercial basis
                    and scale of the Products, the provisions relating to the
                    negotiation, agreement and execution of the Commercial
                    Development Programme being more particularly set forth in
                    Clause 4;

"Effective Date"    means 2nd April 2002;

"Initial
Development
Programme"          means a development programme, the purpose of which is to
                    determine the feasibility of formulating Products using
                    XXXXXX Technology, as the same is more particularly set
                    forth in Schedule 1, subject to such variations as may be
                    agreed between the parties from time to time in accordance
                    with Clause 2.6, and all references to the Initial
                    Development




                                       2
<PAGE>


                    Programme in this Agreement shall, for the avoidance of
                    doubt, include the submission by BioProgress to Boots of
                    such written or other reports and documentation, and the
                    delivery to Boots of such product samples, as may be
                    required pursuant to the provisions of the Initial
                    Development Programme;

"Inventions"        means all or any (as the context so permits) inventions,
                    improvements, discoveries, methods or other valuable
                    developments, whether patentable or otherwise;



"Working Day"       means any day other than a Saturday, Sunday or Bank, Public
                    or Statutory Holidays in England and Wales.



1.2      In this Agreement, words denoting the singular shall include the plural
         and vice versa, and a reference to any gender includes a reference to
         all other genders.

1.3      References in this Agreement to Clauses and Schedules shall be
         references to Clauses of, and Schedules to, this Agreement.

1.4      The Schedules shall form an integral part of this Agreement.




                                       3
<PAGE>

1.5      The headings to this Agreement are for convenience only and shall not
         affect its interpretation.

2.       THE INITIAL DEVELOPMENT PROGRAMME

2.1      Boots and BioProgress shall perform their respective obligations under
         the Initial Development Programme in accordance with the terms thereof,
         subject to the provisions of Clause 2.8.

2.2      Boots shall be entitled, by giving notice to that effect to
         BioProgress, to terminate the Initial Development Programme with
         immediate effect at any time if Boots should reasonably believe that
         there is no reasonable prospect of the Initial Development Programme
         being completed within the anticipated timescale specified therein or
         if Boots does not wish to proceed with the Initial Development
         Programme. If Boots terminates the Initial Development Programme
         pursuant to this Clause 2.2 on any date up to and including 2nd July
         2002, the payment made by Boots pursuant to Clause 2.3.1 shall not be
         refundable but Boots shall be under no obligation to make any further
         payment to BioProgress including, but without limitation, the payment
         referred to in Clause 2.3.2. If Boots terminates the Initial
         Development Programme on any date on or after 3rd July 2002, neither of
         the payments made by Boots to BioProgress pursuant to Clause 2.3 shall
         be refundable but Boots shall be under no obligation to make any
         further payment to BioProgress.

         Boots

2.5      Boots shall remit all monies due to BioProgress under this Agreement by
         electronic bank transfer, or such other method as the parties may agree
         in writing.




                                       4
<PAGE>

2.6      The following procedures shall apply to the making of variations to the
         Initial Development Programme:-

         2.6.1    If Boots requires any amendment to be made to the Initial
                  Development Programme, it shall give notice to BioProgress
                  specifying the nature of the variations required;

         2.6.2    BioProgress shall then, within five (5) Working Days of the
                  receipt of the notice referred to in Clause 2.6.1, give notice
                  to Boots confirming whether it is able to undertake the
                  variation requested and, if so, details of the additional cost
                  (if any) which it reasonably estimates that it will incur, and
                  the additional time (if any) which it estimates will be
                  necessary, in order to complete the Initial Development
                  Programme.

         2.6.3    Boots shall give notice to BioProgress, within ten (10)
                  Working Days of receipt of the notice referred to in Clause
                  2.6.2, stating whether it still requires the said variation to
                  be undertaken in the light of the information provided by
                  BioProgress in that notice.

         2.6.4    If Boots gives notice pursuant to Clause 2.6.3 to the effect
                  that it requires the said variation to be undertaken, then:-

                  2.6.4.1  BioProgress shall complete its execution of the
                           Initial Development Programme in accordance with the
                           said variation;

                  2.6.4.2  The charges payable by Boots to BioProgress under
                           Clause 2.3 shall be increased by such amount (if any)
                           as is notified to Boots by BioProgress pursuant to
                           Clause 2.6.2; and




                                       5
<PAGE>

                  2.6.4.3  The time for completion of the Initial Development
                           Programme shall be increased by such period (if any)
                           as is notified to Boots by BioProgress pursuant to
                           Clause 2.6.2.

         2.6.5    If Boots gives notice pursuant to Clause 2.6.3 that it does
                  not accept the terms for the variation as notified to it by
                  BioProgress pursuant to Clause 2.6.2, then, in the absence of
                  any subsequent agreement between the parties as to the terms
                  on which such variation shall be effected, Boots may, but
                  shall not be obliged to, terminate the Initial Development
                  Programme by giving notice to that effect. In the event of
                  such termination the provisions of the final sentence of
                  Clause 2.2 shall apply.

         2.6.6    If Boots gives no notice pursuant to Clause 2.6.3, or if Boots
                  fails to give notice of termination pursuant to Clause 2.6.5
                  within twenty (20) Working Days of the date of the giving by
                  it of notice to BioProgress pursuant to Clause 2.6.3,
                  BioProgress shall continue the execution of the Initial
                  Development Programme without amendments.

2.7      Without prejudice to any provisions of the Initial Development
         Programme copyright in all reports and other documentation created by
         BioProgress pursuant to the Initial Development Programme or to the
         Agreement generally, shall vest, immediately upon their creation, in
         Boots and BioProgress shall at the request and expense of Boots
         promptly do all such things and execute all such documents as Boots
         shall reasonably require in order validly to vest such copyright in
         Boots.

2.8      If the Initial Development Programme, or any milestone thereof, shall
         not have been completed by the relevant date specified therein, the
         parties shall,




                                       6
<PAGE>

         without prejudice to the rights of Boots under Clause 2.2, negotiate in
         good faith, and use reasonable endeavours to agree, a revised date,
         which shall with effect from agreement of the same become the date by
         which the Initial Development Programme, or the relevant milestone (as
         the case may be) shall then be completed.

3.       INTELLECTUAL PROPERTY RIGHTS

3.1      BioProgress hereby warrants to Boots as follows:-

         3.1.1    that all intellectual property (whether patented or
                  otherwise), know-how, technical information and all other
                  rights, knowledge and information of a similar nature
                  including, without limitation, the XXXXXX(TM) Technology used
                  or to be used by BioProgress or Boots (whether or not
                  disclosed to Boots) in the Initial Development Programme, and,
                  if applicable, the Commercial Development Programme, and also
                  or used in the manufacture of any Product at any time
                  hereafter (whether during the Commercial Development Programme
                  or pursuant to any commercial exploitation of the Product) and
                  relating to the development and manufacture of, and the
                  processes used to XXXl, the capsules used in the xxxxxx or
                  XXXXXX(TM) process are, or shall be, as between BioProgress
                  and Boots vested in BioProgress or its Affiliates absolutely
                  and without encumbrance; and

         3.1.2    that BioProgress has the full and unfettered right and power
                  to enter into this Agreement including, without limitation,
                  the right and power to enter into all its obligations
                  hereunder.



                                       7
<PAGE>

3.2      The warranties given by BioProgress in Clause 3.1 will apply in full to
         any Invention which hereafter vests in BioProgress pursuant to Clauses
         3.4 or 3.6.

3.3      It is agreed and declared that all intellectual property (whether
         patented or otherwise), know-how, technical information and all other
         rights, knowledge and information of a similar nature relating to the
         Product (including, without limitation, all materials and formulations
         used in or necessary for the manufacture thereof, and all processes
         necessary to make, or otherwise relating to such materials and
         formulations) used or to be used by BioProgress or Boots (whether or
         not disclosed to Boots) in the Initial Development Programme, and, if
         applicable, the Commercial Development Programme, and also or used in
         the manufacture of any Product at any time hereafter (whether during
         the Commercial Development Programme or pursuant to any commercial
         exploitation of the Product) but specifically excluding the XXXXXX(TM)
         technology are or shall be, as between BioProgress and Boots, vested in
         Boots absolutely and without encumbrance. Boots hereby grants to
         BioProgress a royalty free, non-exclusive licence, coterminous with the
         Initial Development Programme or, if applicable, the Commercial
         Development Programme, to use all such intellectual property),
         know-how, technical information and other rights, knowledge and
         information for the purpose of performing its duties in relation to the
         Initial Development Programme and the Commercial Development Programme,
         but not further or otherwise.

3.4      All Inventions relating to the Product (including, without limitation,
         all materials and formulations used in or necessary for the manufacture
         thereof, and all processes necessary to make, or otherwise relating to
         such materials




                                       8
<PAGE>

         and formulations) made during or as a consequence of the execution of
         the Initial Development Programme shall be the property of Boots.

3.5      If BioProgress, whether solely or jointly with Boots, makes during the
         Initial Development Programme any Invention to which Clause 3.3
         relates, BioProgress agrees to assign to Boots the entire right, title
         and interest anywhere in the world to Boots, without any additional
         payment other than the charges payable by Boots to BioProgress for the
         execution of the Initial Development Programme (or such part thereof as
         shall have become due and payable as at the effective date of
         termination of the Initial Development Programme, if applicable).
         BioProgress shall, at the request and expense of Boots, do all such
         things and execute all such documents as Boots shall reasonably require
         in order validly to vest such right, title and interest in Boots, and
         shall co-operate fully in the prosecution of any such right, title or
         interest.

3.6      All Inventions relating to materials and formulations used in the
         development and manufacture of, and the processes used to form and
         seal, the capsules used in the encapsulation or XXXXXX(TM) process
         relating to the Product, shall be the property of BioProgress.

3.7      Subject to the provisions of Clause 3.8, if Boots, whether solely or
         jointly with BioProgress, makes any Invention to which Clause 3.6
         relates either during or as a consequence of the execution of the
         Initial Development Programme, Boots agrees to assign to BioProgress
         the entire right, title and interest anywhere in the world to
         BioProgress. Boots shall, at the request and expense of BioProgress, do
         all such things and execute all such documents as Boots shall
         reasonably require in order validly to vest such right, title and



                                       9
<PAGE>

         interest in BioProgress, and shall co-operate fully in the prosecution
         of any such right, title or interest.

3.8      In the event that BioProgress should decide not to file any patent
         applications relating to any Invention to which Clause 3.6 relates, or
         fails to do so within six (6) months of the completion or effective
         termination of the Initial Development Programme (or, if later, from
         the date on which such Invention is made, of which BioProgress shall
         immediately give notice to Boots), Boots may, at its discretion, file
         patent applications relating to such Inventions in any country or
         countries in the world in which patent applications relating to the
         said Inventions have not been filed by BioProgress. BioProgress if
         required by Boots (whether for the purpose of filing patent
         applications in respect of the same or otherwise) shall promptly assign
         to Boots the entire right, title and interest throughout the world in
         such Inventions without any payment other than the charges payable to
         BioProgress by Boots for the execution of the Initial Development
         Programme (or such part thereof as shall have become due and payable as
         at the effective date of termination of the Initial Development
         Programme, if applicable). Upon the assignment to Boots of such right,
         title and interest, Boots shall grant to BioProgress an irrevocable,
         royalty free, non-exclusive licence, with the power to grant
         sub-licenses, to use such Inventions, and any patent or patent
         applications applicable thereto for any purpose not directly or
         indirectly competitive with the development, manufacture, sale,
         distribution or marketing of the Products (and for the avoidance of
         doubt, it is hereby declared that any such purpose shall not be
         regarded as not being so competitive purely on the basis that it is
         intended to be carried on in any country in the world in which the
         Products are not currently being developed, manufactured, sold,
         distributed or marketed, whether by Boots or any third party).
         BioProgress shall, at the



                                       10
<PAGE>

         request and expense of Boots, do all such things and execute all such
         documents as Boots shall reasonably require in order validly to vest
         such right, title and interest in Boots, and shall co-operate fully in
         the prosecution of any such right, title or interest.

3.9      For the avoidance of doubt, all references to the right, title and
         interest in an Invention shall include, without limitation, the right
         to grant licences of the same anywhere in the world.

4.       AFTER COMPLETION OF THE INITIAL DEVELOPMENT PROGRAMME

4.1      Boots shall have the right, subject to the payment of the sums
         specified hereinafter, within six (6) months of the completion of the
         Initial Development Programme, to give notice to BioProgress confirming
         whether or not it wishes to enter into the Commercial Development
         Programme. If Boots exercises the said right prior to the expiry of one
         calendar month from the date of the completion of the Initial
         Development Programme, such right shall be exercisable without charge.
         However, Boots shall only be entitled to exercise the said right after
         the expiry of the said period of one calendar month upon payment XXXXXX
         in respect of each subsequent calendar month, payable in advance at the
         beginning of that month. If Boots fails to give such notice within the
         said period, or fails to make any payment under this Clause 4.1 upon
         the date of commencement of the period to which it relates or, if
         later, within 30 (thirty) days of the receipt by it of BioProgress'
         invoice therefor, it shall be deemed to have given notice to
         BioProgress that it does not wish to proceed with the Commercial
         Development Programme.

4.2      If Boots gives notice (or, pursuant to Clause 4.1, is deemed to have
         given notice) that it does not wish to proceed with the Commercial
         Development Programme, the following provisions shall apply:-



                                       11
<PAGE>

         4.2.1    All Inventions which may have been vested in or assigned to
                  Boots pursuant to Clause 3, together with all patents and
                  patent applications relating thereto, shall immediately
                  re-vest in BioProgress, who shall, for the avoidance of doubt,
                  have, as between itself and Boots the full and unencumbered
                  right to exploit such Inventions, patents and patent
                  applications for any purpose throughout the world; and

         4.2.2    Boots shall, at the request and expense of BioProgress,
                  promptly do all such things and execute all such documents as
                  BioProgress reasonably requires in order validly to vest such
                  Inventions, patents and patent applications in BioProgress.

4.3      If Boots gives notice to BioProgress pursuant to Clause 4.1 that it
         does wish to proceed with the Commercial Development Programme, Boots
         and BioProgress shall negotiate in good faith, and use reasonable
         endeavours to agree, all terms and conditions relating to the
         Commercial Development Agreement including, without limitation, the
         precise nature, content and purpose of the Commercial Development
         Programme, the field of products to which it will relate, the ownership
         of all Inventions and other intellectual property and know-how
         conceived or discovered during the Commercial Development Programme,
         and the timescales for its completion. If, notwithstanding the
         compliance by both parties of their obligations as set out in the
         foregoing provisions of this Clause 4.3, the parties have not entered
         into a binding written agreement in respect of all matters relating to
         the Commercial Development Programme within three (3) months of the
         date of giving of notice by Boots pursuant to clause 4.1, then either
         party may terminate such negotiations with immediate effect upon giving
         notice to that effect to the other party.



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<PAGE>

4.4      If BioProgress and Boots shall enter into the said binding written
         agreement referred to in Clause 4.3, the parties shall then, subject to
         Clause 4.5, negotiate in good faith, and use reasonable endeavours to
         agree, the terms upon which any Products developed pursuant to the
         Commercial Development Programme will be supplied to or manufactured by
         Boots. If no such binding agreement is entered into within nine (9)
         months of the date of the giving of notice by Boots to BioProgress
         pursuant to Clause 4.1, the following conditions shall apply:-

         4.4.1    Boots may, by giving notice to that effect to BioProgress,
                  terminate the negotiations relating to the said commercial
                  terms (either with regard to all such commercial terms or with
                  regard to any specified products) by giving notice to that
                  effect to BioProgress. If Boots shall give such notice, All
                  Inventions which may have vested in or been assigned to Boots
                  pursuant to Clause 3, together with all patents and patent
                  applications relating thereto, shall immediately re-vest in
                  BioProgress, who shall, for the avoidance of doubt, have, as
                  between itself and Boots the full and unencumbered right to
                  exploit such Inventions, patents and patent applications for
                  any purpose throughout the world;

         4.4.2    Unless and until Boots serves any notice to BioProgress
                  pursuant to Clause 4.4.1, the provisions of the first
                  paragraph of this Clause 4.4 shall continue to apply, however
                  the provisions of Clause 5 shall apply only in relation to any
                  Products in respect of which negotiations are actively
                  continuing;



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<PAGE>

         4.4.3    In respect of any Products to which the provisions of Clause 5
                  shall cease to apply pursuant to Clause 4.4.2, BioProgress
                  shall not without the prior written consent of Boots (such
                  consent not to be unreasonably withheld) enter into any
                  discussions, negotiations or agreements with any third party
                  concerning any Product, the effect of which would be to
                  preclude Boots from continuing or resuming negotiations with
                  BioProgress in respect of such Products;

4.5      Notwithstanding the provisions of Clause 4.4, it is agreed that any
         commercial terms agreed by the parties pursuant to Clause 4.4 shall
         include provisions giving effect specifically to the matters, or
         embodying the principles (as the case may be), set out in Schedule 2.

5        EXCLUSIVITY

5.1      BioProgress shall not, and shall procure that its Affiliates do not, at
         any time participate or become involved in any capacity in, whether
         alone or in collaboration or association with any third party, or
         provide any form of support (whether financial, technical or
         otherwise), advice or services in connection with, the development,
         manufacture, supply, distribution or marketing of any Product which is
         or is capable of being the subject of this Agreement nor enter into or
         participate in any discussions, negotiations or agreements, whether
         binding or otherwise, with any third party in relation to any such
         participation, involvement or provision, whether current or proposed,
         except in the following circumstances:-




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<PAGE>

         5.1.1    Boots has terminated the Initial Development Programme, other
                  than as a result of any failure by BioProgress to perform any
                  of its obligations under this Agreement in a timely manner;

         5.1.2    Boots has served or is deemed to have served any notice on
                  BioProgress pursuant to Clause 4.1 to the effect that it does
                  not wish to proceed with the commercial Development Programme,
                  provided that where negotiations are continuing with regard to
                  any Product, the above exception shall only apply in respect
                  of any Product which formed part of the subject matter of the
                  Initial Development Programme but which Boots does not wish to
                  form part of the Commercial Development Programme; or

         5.1.3    Boots terminates any negotiations relating to the Commercial
                  Development Programme pursuant to Clause 4.4.1, provided that
                  where negotiations are continuing with regard to any Product,
                  the above exception shall only apply in respect of any Product
                  in respect of which such negotiations are terminated.

5.2      For the avoidance of doubt, nothing in Clause 5.1 shall prevent
         BioProgress or its Affiliates at any time from supplying to third
         parties machinery, ingredients, excipients or other materials intended
         to be used or capable of being used for the development or manufacture
         of any product which is or is capable of being the subject of this
         Agreement, or from licensing to third parties the use of any
         intellectual property (whether patented or otherwise), know-how,
         technical information or any other rights, knowledge and information of
         a similar nature including, without limitation, the XXXXXX(TM)
         Technology for the



                                       15
<PAGE>

         purposes of the development or manufacture of any product which is
         or is capable of being the subject of this Agreement.

5.3      Nothing in this Agreement shall prevent Boots at any time from entering
         into any discussions, negotiations or agreements, whether binding or
         otherwise the subject matter of which is, whether in whole or in part,
         the development, manufacture, sale, distribution or promotion of any
         Product which is capable of being developed, manufactured, sold,
         distributed or marketed in competition with any Products which are the
         subject of the Agreement.

5.4      If either:-

         5.4.1    BioProgress receives directly or indirectly from any third
                  party any expression of interest by that third party in
                  entering into discussions, negotiations or commercial
                  arrangements with BioProgress in relation to the development,
                  manufacture or supply of any product capable of falling within
                  the definition of "Product" in Clause 1 and developed or
                  manufactured using N-Robe(TM) Technology; or

         5.4.2    BioProgress wishes to enter into discussions, negotiations or
                  commercial arrangements with any third party in relation to
                  the development, manufacture or supply of any product to which
                  Clause 5.4.1 applies.

         BioProgress shall promptly give notice to that effect to Boots and
         allow to Boots a period of 90 (ninety) days from the date of receipt of
         such notice to determine whether it wishes to enter into any such
         discussions, negotiations or arrangements with BioProgress. If Boots



                                       16
<PAGE>

         indicates that it is so interested, Boots and BioProgress shall
         negotiate with each other in good faith and use reasonable endeavours
         to agree the terms of such development, manufacture or supply.
         BioProgress shall not enter into any discussions, negotiations or
         commercial arrangements with any third party in relation to the
         development, manufacture or supply of such product unless and until
         Boots has informed BioProgress that it does not wish to enter into the
         same with BioProgress, or the said period of 90 (ninety) days has
         elapsed, or the parties are unable to reach agreement upon the terms of
         such development, manufacture or supply, notwithstanding the
         performance by the parties of their obligation under this Clause 5.4,
         whichever shall be the earlier.

6        CONFIDENTIALITY

6.1      Subject to the following provisions of this Clause, neither party shall
         (whether during the term of this Agreement or thereafter) without the
         prior written consent of the other disclose to any person, firm or
         company any information supplied by the other under or in contemplation
         of this Agreement, or use any such information except as contemplated
         or provided hereunder.

6.2      Each party shall inform any of its employees to whom any of the said
         information is disclosed of the provisions of this Clause and shall use
         reasonable endeavours to ensure that each such employee shall observe
         such provisions.

6.3      The obligations of each party under this Clause shall not apply, or
         shall cease to apply, to any information which:-



                                       17
<PAGE>

         6.3.1    is public knowledge at the time of this Agreement, or
                  subsequently becomes public knowledge through no act or
                  failure to act on the part of the recipient or its employees;
                  or

         6.3.2    is known to the recipient and at its free disposal at the time
                  of disclosure, or which is subsequently disclosed to the
                  recipient by a third party lawfully entitled to disclose the
                  same; or

         6.3.3    is required to be disclosed by law.

7        FORCE MAJEURE

7.1      Neither party shall be under any liability whatsoever to the other for
         failure or delay in the performance of its obligations under the
         Agreement where such performance becomes impracticable by reason of
         Force Majeure.

7.2      The party whose performance is not so affected by reason of Force
         Majeure shall be entitled to terminate this Agreement with immediate
         effect by giving notice to the other party if the performance by the
         other party of its obligations under this Agreement becomes or remains
         impracticable by reason of Force Majeure for an aggregate period in
         excess of ninety (90) days.

7.3      In this Clause, the expression "Force Majeure" means war, labour
         disputes, accidents, shortages of materials, acts of government (or
         other competent authorities) or any other matters (whether or not of
         the same nature of the foregoing), which are beyond the reasonable
         control of the party affected.



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<PAGE>

8        TERMINATION

8.1      Either party may terminate this Agreement with immediate effect by
         giving notice to the other party in any of the following events:-

         8.1.1    if the other party should be in breach of any of the
                  provisions of this Agreement and such breach (if capable of
                  remedy) shall continue thirty (30) days after notice in
                  writing specifying the breach and requiring the same to be
                  remedied has been given; or

         8.1.2    if a resolution is passed or adopted for the winding-up of the
                  other party (otherwise than for the purposes of and followed
                  by an amalgamation or reconstruction previously approved in
                  writing), or if a petition is presented for the appointment of
                  an administrator or liquidator (and is not discharged within
                  14 days), or if a receiver or administrative receiver is
                  appointed, or an encumbrancer takes possession of the whole or
                  any part of its undertaking or assets, or if the other party
                  becomes insolvent , or if any analogous event shall occur in
                  any territory to whose jurisdiction the other party is
                  subject; or

         8.1.3    if the other party makes or seeks to make any composition or
                  arrangement with its creditors, or proposes any voluntary
                  arrangement, or is unable to pay its debts as they fall due,
                  or if any distress or execution is levied on any of its assets
                  (and is not discharged within fourteen (14) days), or if any
                  judgment for a monetary sum be given against it and is not
                  paid within fourteen (14) days, or if any analogous event
                  shall occur in any territory to whose jurisdiction the other
                  party is subject; or



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<PAGE>

         8.1.4    if the other party ceases or, in the reasonable opinion of the
                  party giving notice of termination, is likely to cease, to
                  carry on the whole or any relevant part of its business or
                  trade.

8.2      Termination for whatever cause of this Agreement shall be without
         prejudice to the rights of either party arising hereunder or as a
         result of any default or breach of obligation hereunder, which shall
         have accrued prior to the date of such termination.

8.3      Notwithstanding termination of this Agreement, the provisions of Clause
         6 shall continue in full force and effect.

9        ASSIGNMENT

9.1      Boots may assign any of its rights or obligations hereunder to any of
         its Affiliates.

9.2      This Agreement is personal to BioProgress who shall not, without Boots'
         prior written consent, assign any of its rights or obligations
         hereunder and any purported or attempted assignment by BioProgress or
         transfer by operation of law without such consent shall give Boots the
         right to terminate this Agreement with immediate effect by giving
         notice in writing to BioProgress.

9.3      This Agreement shall be binding on the permitted assignees and
         successors of the parties hereto.

10       CHANGE OF CONTROL

10.1     BioProgress shall inform Boots immediately in the event of there being
         any change in the control of BioProgress, for which purpose "control"



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<PAGE>


         shall have the same meaning as that contained in the definition of
         "Affiliate" in Clause 1.1.

10.2     If there is any such change in control (whether or not Boots has
         received notice thereof), Boots may terminate this Agreement with
         immediate effect by giving notice in writing to BioProgress.

11       RELATIONSHIP

         Each party shall be responsible for its own obligations arising under
         or consequent upon this Agreement and it is agreed that neither this
         Agreement nor the activities of the parties shall result in the
         creation of a partnership or other relationship whereby either party
         shall be held in any way responsible for the acts or omissions of the
         other.

12       WAIVER

12.1     No relaxation, forbearance, delay or indulgence by either party in
         exercising its rights under this Agreement, or any granting of time by
         such party, shall prejudice or affect its rights hereunder.

12.2     No waiver of any default or breach under this Agreement, or failure to
         enforce any rights by either party, shall constitute a waiver of any
         subsequent or continuing default or breach.

12.3     No waiver shall be effective unless made in writing, agreed and signed
         on behalf of the party so granting the waiver.

13       NOTICES

13.1     Any notice, request or other communication required to be given under
         this Agreement shall be made in the English language, in writing, and



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<PAGE>

         may be hand-delivered or sent by pre-paid first class post, or
         facsimile transmission, to the recipient at the address first set out
         in this Agreement (or such other address as either party may specify by
         prior written notice to the other for this purpose) and marked for the
         attention of the following respective recipients:-

         13.1.1   in the case of notice served upon Boots, to the Managing
                  Director,, at the same address; and


         13.1.2   in the case of a notice served on BioProgress, Managing
                  Director BioProgress Technology Limited at the same address.

13.2     Subject to Clause 13.3, notice shall be deemed to have been received:-

         13.2.1   if delivered by hand, on the date of delivery; or

         13.2.2   if sent by post, on the second Working Day after the date of
                  posting; or

         13.2.3   if sent by facsimile, on the date of transmission, provided
                  that the sender's apparatus has recorded the transmission as
                  having been successfully made.

13.3              Where, having regard to Clause 13.2, any notice would be
                  deemed to have been given on a day, which is not a Working
                  Day, or if the actual time of delivery or transmission is
                  after 1700 hours, that notice shall be deemed to have been
                  served on the next following Working Day.



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<PAGE>

13.4     It shall be sufficient in proving service that the letter containing
         the notice was properly addressed and, as the case may be, delivered,
         put in the post or transmitted.

14       ENTIRE AGREEMENT AND AMENDMENTS

14.1     This Agreement (together with any documents referred to herein)
         supersedes any preliminary or previous correspondence, negotiations,
         arrangements or agreements (except in the case of fraud) between, and
         represents the entire understanding of, the parties in relation to the
         matters specifically dealt with herein.

14.2     No amendment to or alteration of this Agreement shall be effective
         unless made in writing, agreed and signed by a duly authorised
         representative of each of the parties hereto.

15       APPLICABLE LAW AND SERVICE OF PROCESS

15.1     The construction, interpretation, meaning, validity and performance of
         this Agreement shall be governed by the laws of England, which is
         agreed to be the proper law of this Agreement.

15.2     The addresses of the parties for service of any process or documents
         required to be served by reason of law (or any rule, code or regulation
         having the force of law) in the United Kingdom are as follows:-

         15.2.1   in the case of Boots, the address of Boots as set out in the
                  heading to this Agreement, marked for the attention of [the
                  Company Secretary, with a copy to the Managing Director, Boots
                  Healthcare International; and



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<PAGE>

         15.2.2   in the case of BioProgress, the address of BioProgress as set
                  out in the heading to this Agreement, marked for the attention
                  of The Managing Director BioProgress Technology Limited.

15.3     The parties hereto submit to the non-exclusive jurisdiction of the
         English Courts.

16       INVALIDITY AND SEVERABILITY

16.1     If any provision of this Agreement shall be held unlawful, invalid or
         unenforceable in whole or in part by any court or competent authority,
         such provision shall be deemed severed and subject to Clause 16.2, the
         Agreement shall continue to be valid as to all other provisions, and
         the parties shall meet and negotiate in good faith a valid and
         enforceable replacement for the severed provision, which replacement
         shall be designed to achieve as nearly as possible the same commercial
         objective as the original.

16.2     In the event that, notwithstanding the performance of the parties of
         their obligations under Clause 16.1, the parties cannot agree upon a
         replacement provision within one (1) calendar month of the same being
         held unlawful, invalid or unenforceable, then either party may
         terminate this Agreement forthwith by notice in writing.

17       ANNOUNCEMENTS

         Neither party shall, without the prior written consent of the other
         (such consent not be unreasonably withheld) make any announcement or
         public statement, or make any other form of public disclosure
         (including, without limitation, the issuing of any press release)
         relating to or concerning this Agreement or any part thereof, or any
         activity carried on pursuant thereto.



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<PAGE>

         Provided that nothing in this Clause 17 shall prevent either party from
         making any announcement required by the rules of any stock exchange to
         which the party making such announcement is subject, in which event the
         party required to make such announcement shall use reasonable
         endeavours to agree with the other party the text of such announcement
         prior to disclosure, and shall in any event inform the other party of
         the requirement to make such disclosure prior to the making of the
         same.

IN WITNESS whereof this Agreement has been signed by the duly authorised
representatives of the parties the day and year first before written.

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