<PAGE>

                        INVESTMENT AND ROYALTY AGREEMENT

This Investment and Royalty Agreement (this "Agreement") is made as of July 31,
2002, by and between Columbia Laboratories, Inc., a Delaware corporation
("Columbia"), and PharmaBio Development Inc., a North Carolina corporation
("PharmaBio").

Background and Overview

A.     Contemporaneously with this Agreement, the parties are entering into a
       Stock Purchase Agreement, whereby PharmaBio is purchasing shares of stock
       of Columbia (the "Stock Purchase Agreement").

B.     PharmaBio is willing to provide certain additional funds to Columbia,
       subject to and upon the terms and conditions below.

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.0    Definitions.

1.1    "Advantage-S" shall mean the over-the-counter vaginal contraceptive gel
       product containing nonoxynol-9 currently marketed in the Territory as
       Advantage-S(R), and any other over-the-counter vaginal contraceptive
       product marketed by Columbia or its Affiliates, licensees or sublicensees
       as a replacement or substitute for or in lieu of Advantage-S.

1.2    "Adverse Marketing Event" shall mean the occurrence of any of the
       following: (i) Columbia or its licensees shall withdraw, or be required
       by the FDA or other governmental authority to withdraw, Crinone or
       Prochieve from the market for any reason for a period that is, or is
       reasonably expected to be, greater than [***]days; or (ii) Columbia or
       its licensees shall fail to have a supply of Crinone or Prochieve, or any
       ingredients or components thereof, consistent with past quantities and
       practices, for a period of time that is, or is reasonably expected to be,
       greater than [***] days.

1.3    "Affiliate" shall mean, as to any person or entity, any corporation or
       business entity controlled by, controlling, or under common control with
       such person or entity. For this purpose, "control" shall mean direct or
       indirect beneficial ownership of at least fifty percent (50%) of the
       voting stock or income interest in such corporation or other business
       entity, or such other relationship as, in fact, constitutes actual
       control.

1.4    "Annual Period" shall mean a twelve-month period beginning on January 1,
       2003 and each anniversary thereof.

1.5    "Crinone" shall mean the vaginal progesterone gel product containing
       progesterone in a

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

<PAGE>

       concentration of four percent (4%) or eight percent (8%) currently
       marketed in the Territory by Serono, Inc. for secondary amenorrhea and
       assisted reproductive technology and any other vaginal progesterone
       product marketed by Columbia or its Affiliates, licensees or sublicensees
       as a replacement or substitute for or in lieu of Crinone.

1.6    "Debt" shall mean (i) indebtedness for borrowed money, (ii) obligations
       evidenced by bonds, debentures, notes or other similar instruments, (iii)
       obligations to pay the deferred purchase price of property or services,
       (iv) obligations as lessee under leases which shall have been or should
       be, in accordance with generally accepted accounting principles, recorded
       as capital leases, and (v) obligations under direct or indirect
       guaranties in respect of, and obligations (contingent or otherwise) to
       purchase or otherwise acquire, or otherwise to assure a creditor against
       loss in respect of, indebtedness or obligations of others of the kinds
       referred to in clauses (i) through (iv) above. For the avoidance of
       doubt, Debt shall not include day-to-day obligations and payables
       incurred by Columbia in the ordinary course of business.

1.7    "FDA" shall mean the United States Food and Drug Administration.

1.8    "GAAP" shall mean generally accepted accounting principles.

1.9    "Liens" shall mean any lien, security interest, mortgage, pledge,
       encumbrance, charge or claim.

1.10   "Master Services Agreement" shall mean the agreement and initial work
       order, dated as of the date hereof, between Columbia and Innovex LP, a
       New Jersey limited partnership, whose address is 10 Waterview Boulevard,
       Parsippany, NJ 07054 ("Innovex"), which is an Affiliate of PharmaBio,
       pursuant to which Innovex agrees to provide contract sales services to
       Columbia.

1.11   "Minimum Sales Force Level" shall mean a Columbia sales force size of not
       less than forty (40) Columbia sales representatives promoting Prochieve
       in the first or second detailing positions, provided that any open sales
       territory for which Columbia or Innovex is actively recruiting a sales
       representative shall be counted as a Columbia sales representative for
       purposes of this definition.

1.12   "Net Sales" shall mean the gross amount billed or invoiced by Columbia or
       an Affiliate or any licensee or sublicensee (or other transferee), or on
       behalf of or for the benefit of Columbia or an Affiliate or any licensee
       or sublicensee (or other transferee), for sales of the Products, to a
       third party in the Territory, less the following items, but only to the
       extent such items are included in such gross amount and without
       duplication:

                (i)       discounts, including cash and quantity discounts,
                          charge-back payments, refunds and rebates granted to
                          managed health care organizations or similar
                          organizations or to federal, state and local
                          governments (including, without limitation, Medicaid
                          rebates), their agencies, and purchasers and
                          reimbursers or to trade customers, including but not
                          limited to,

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       2

<PAGE>

                          wholesalers and chain and pharmacy buying groups;

                (ii)      actual credits or allowances resulting from customer
                          claims, damaged goods, rejections or returns of the
                          Products, including recalls, regardless of the party
                          requesting such;

                (iii)     freight, postage, shipping and insurance charges
                          actually allowed or paid for delivery of Products, to
                          the extent billed;

                (iv)      taxes, duties or other governmental charges levied on,
                          absorbed or otherwise imposed on sale of such
                          Products, including without limitation value-added
                          taxes, or other governmental charges otherwise
                          measured by the billing, when included in billing, as
                          adjusted for rebates, charge-backs and refunds, but
                          not including income or similar taxes; and

                (v)       actual write-offs of uncollectible customer accounts
                          for recorded sales, provided that (x) any subsequent
                          collection of such uncollectible accounts shall be
                          restored as Net Sales at the time of collection and
                          (y) Columbia shall follow commercially reasonable
                          practices of collecting and otherwise administering
                          such accounts.

         Notwithstanding the foregoing, for so long as the Amended and Restated
         License and Supply Agreement dated as of June 4, 2002 (the "License and
         Supply Agreement") between Columbia Laboratories (Bermuda) Limited and
         Ares Trading S.A. ("Ares") is in effect, then with respect to Crinone,
         "Net Sales" shall mean the gross amount billed or invoiced by Columbia
         or an Affiliate or any licensee or sublicensee (or other transferee),
         or on behalf of or for the benefit of Columbia or an Affiliate or any
         licensee or sublicensee (or other transferee), for sales of Crinone to
         Ares or an Affiliate or any licensee or sublicensee (or other
         transferee) (and shall not mean sales of Crinone by Ares or an
         Affiliate or any licensee or sublicensee (or other transferree)), which
         amount shall include any additional amounts paid by Ares or an
         Affiliate or any licensee or sublicensee (or other transferee) with
         respect to sales made in the "Non-Fertility Specialist Market"
         including without limitation pursuant to Section 5(a) of the License
         and Supply Agreement.

1.13     "Prochieve" shall mean the vaginal progesterone gel product containing
         progesterone in a concentration of four percent (4%) or eight percent
         (8%) to be marketed in the Territory under the trademark Prochieve(TM),
         or any other trademark, for secondary amenorrhea and assisted
         reproductive technology or any other vaginal progesterone product
         marketed by Columbia or its Affiliates, licensees or sublicensees as a
         replacement or substitute for or in lieu of Prochieve .

1.14     "Product" shall mean each of Advantage-S, Crinone, Prochieve, and
         RepHresh and "Products" shall mean all of such products together, in
         each case for any and all formulations, delivery mechanisms and
         indications, including "off-label" uses.

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                        3

<PAGE>

1.15   "Royalty Term" shall mean the five (5) consecutive Annual Periods
       beginning on January 1, 2003.

1.16   "RepHresh" shall mean the vaginal get product to be marketed in the
       Territory under the trademark RepHresh(TM), or any other trademark, for
       the elimination of vaginal odor and maintaining physiologic vaginal pH or
       any other vaginal gel product marketed by Columbia or its Affiliates,
       licensees or sublicensees as a replacement or substitute for or in lieu
       of RepHresh.

1.17   "Territory" shall mean the United States of America and all states
       thereof, the District of Columbia, and Puerto Rico.

2.0    Investment and Royalties; Related Agreements.

2.1    PharmaBio will make the following payments to Columbia:

       Payment Date                         Amount

       September 30, 2002                        $1,125,000

       December 31, 2002                         $1,125,000

       March 31, 2003                            $1,125,000

       June 30, 2003                             $1,125,000

       Notwithstanding the foregoing, upon the occurrence of an Event of Default
       (as defined below), PharmaBio may at any time, if an Event of Default
       shall then be continuing, by written notice to Columbia terminate this
       Agreement (including PharmaBio's obligations to pay the amounts set forth
       above), so long as Innovex is not in default in any material respect of
       its performance of its material obligations under the Master Services
       Agreement and the work orders thereunder relating to the Products. "Event
       of Default" shall mean and include each of the following:

       (a)    Columbia shall fail to pay any royalties to PharmaBio when the
              same become due and payable to PharmaBio and [***]business days
              have elapsed following receipt of written notice of such
              non-payment from PharmaBio to Columbia;

       (b)    Any material representation or warranty made by Columbia under
              this Agreement shall prove to have been untrue or incorrect in any
              material respect when made;

       (c)    Columbia shall fail to perform or comply with any material
              agreement or covenant made by Columbia under this Agreement in any
              material respect;

       (d)    Columbia shall sell, assign, license, lease or otherwise transfer
              all or substantially all of its assets or properties owned (or
              otherwise held by it) relating to one or more of the Products, in
              one or a series of related transactions, without the prior

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                        4

<PAGE>

          written consent of PharmaBio;

     (e)  An Adverse Marketing Event shall occur;

     (f)  Columbia shall (i) commence a voluntary case under the federal
          bankruptcy laws (as now or hereafter in effect), (ii) file a petition
          seeking to take advantage of any other laws relating to bankruptcy,
          insolvency, reorganization, winding up or composition for adjustment
          of debts, (iii) consent to or fail to contest in a timely and
          appropriate manner any petition filed against it in an involuntary
          case under such bankruptcy laws or other laws, (iv) apply for or
          consent to, or fail to contest in a timely and appropriate manner, the
          appointment of, or the taking of possession by, a receiver, custodian,
          trustee, or liquidator of itself or of a substantial part of its
          property, (v) admit in writing its inability to pay its debts as they
          become due, (vi) make a general assignment for the benefit of
          creditors, or (vii) take any corporate action for the purpose of
          authorizing any of the foregoing;

     (g)  A case or other proceeding shall be commenced against Columbia in any
          court of competent jurisdiction seeking (i) relief under the federal
          bankruptcy laws (as now or hereafter in effect) or under any other
          laws relating to bankruptcy, insolvency, reorganization, winding up or
          adjustment of debts, or (ii) the appointment of a trustee, receiver,
          custodian, liquidator or the like for Columbia or any of its
          subsidiaries or for all or any substantial part of their respective
          assets, and such case or proceeding shall continue without dismissal
          or stay for a period of sixty (60) consecutive days, or an order
          granting the relief requested in such case or proceeding (including,
          but not limited to, an order for relief under such federal bankruptcy
          laws) shall be entered; or

     (h)  Any indebtedness of Columbia or any of its subsidiaries in excess of
          $[***] shall be declared to be due and payable, or required to be
          prepaid, prior to the stated maturity thereof, and Columbia shall fail
          to pay the same within [***]days of such declaration.

     In the event that PharmaBio terminates this Agreement upon an Event of
     Default, then Columbia shall pay to PharmaBio the aggregate amount (the
     "Repayment Amount") by which the aggregate amount of payments by PharmaBio
     under this Agreement (the "Aggregate Payments") exceeds the aggregate
     amount of royalties paid by Columbia to PharmaBio under this Agreement, in
     full satisfaction of Columbia's obligations under this Agreement. For
     purposes of this calculation interest shall accrue on the Aggregate
     Payments at a rate equal to the Prime Rate as announced from time to time
     by Wachovia Bank, N.A. (or its successor) plus [***]percent ([***]%),
     beginning with the payment of funds by PharmaBio to Columbia until the
     Repayment Amount is paid by Columbia. The Repayment Amount shall be payable
     over two (2) years in eight (8) equal quarterly installments beginning
     thirty (30) days after such termination. PharmaBio shall have no obligation
     to exercise its remedies under this Section 2.1 and in lieu of this Section
     2.1 may exercise its remedies under the other provisions of this Agreement.

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                        5

<PAGE>

2.2  In consideration for the performance by PharmaBio of its funding
     commitments set forth in Section 2.1, Columbia shall pay PharmaBio
     royalties on Net Sales during the Royalty Term. The royalty payments
     payable by Columbia to PharmaBio with respect to each Annual Period are as
     follows:

               -------------------------------------------------------
               Annual Period during the        Royalty on Net Sales
               Royalty Term
               -------------------------------------------------------
               1                               5%
               -------------------------------------------------------
               2                               5%
               -------------------------------------------------------
               3                               5%
               -------------------------------------------------------
               4                               5%
               -------------------------------------------------------
               5                               5%
               -------------------------------------------------------

     Notwithstanding anything to the contrary contained in this Agreement, the
     total royalties payable to PharmaBio under this Section 2.2 shall not (i)
     exceed in the aggregate for all Annual Periods the amount of $[***] (the
     "Maximum Royalty Amount"), or (ii) provided PharmaBio is not in default of
     its payment obligations hereunder (and ten (10) business days shall have
     elapsed following receipt of written notice of such default from Columbia
     to PharmaBio), be less than $[***]in the aggregate for all Annual Periods.
     With respect to such minimum royalty commitment: if by February 28, 2005,
     PharmaBio has not received at least $[***]in aggregate royalties under this
     Section 2.2 (with respect to Net Sales during the Royalty Term through
     December 31, 2004), then Columbia will pay PharmaBio the difference between
     the amount of royalties actually received and $[***]; and at the end of the
     fifth (5th) Annual Period, if PharmaBio has not received at least $[***]in
     aggregate royalties under this Section 2.2, then Columbia will pay
     PharmaBio the difference between the amount of royalties actually received
     and $[***], provided that the time for payments under this sentence shall
     be extended by the period of any extension of the Royalty Term under
     Section 2.4, provided further that in no event shall such extension for
     payments under this sentence be extended more than six (6) months beyond
     the original due date. Such $[***]in minimum payments shall be payable by
     Columbia to PharmaBio notwithstanding the actual sales of the Products or
     other Product-related events, including without limitation any Adverse
     Marketing Event.

     The royalty payments under this Section 2.2 shall be paid by Columbia as
     soon as reasonably practicable following the end of each calendar quarter
     (but not later than forty five (45) days following the end of each calendar
     quarter, except following the fourth quarter, in which case Columbia shall
     have up to 60 days) during the five (5) Annual Periods in the Royalty Term.
     Accompanying each of Columbia's payments to PharmaBio under this Section,
     Columbia will provide to PharmaBio a report showing the applicable Net
     Sales and the calculation of the resulting royalty payment. Columbia also
     shall provide PharmaBio with all sales data for the Products that are
     available to Columbia.

2.3  As further consideration for PharmaBio's funding commitments set forth in
     Section 2.1,

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                        6

<PAGE>

     on the date of this Agreement, Columbia shall pay to PharmaBio a fee in the
     amount of [***].

2.4  Columbia shall use its commercially reasonable efforts to commercialize the
     Products in the Territory. In this regard, Columbia will provide a sales
     force of an average size, calculated on a quarterly basis, not less than
     the Minimum Sales Force Level during the Royalty Term. If, at any time
     during such period, (a) Columbia reduces the Products' average sales force
     below the Minimum Sales Force Level for a period of more than sixty (60)
     days and Innovex is not in default in any material respect of its
     performance of its material obligations under the Master Services Agreement
     and the work orders thereunder relating to the Products or (b) an Adverse
     Marketing Event shall occur, then Columbia and PharmaBio will negotiate in
     good faith to restructure PharmaBio's commitments under Section 2.1 and the
     corresponding royalty amounts under Section 2.2, which negotiations will
     take into account the implications of the reduced sales force size or
     Adverse Marketing Event, as the case may be, on future sales of the
     Products. If the parties are unable to agree to such restructuring within
     thirty (30) days after PharmaBio gives written notice to Columbia of its
     intent to pursue a remedy under this Section 2.3, then, provided Innovex is
     not in default in any material respect of its performance of its material
     obligations under the Master Services Agreement and the work orders
     thereunder relating to the Products, PharmaBio may, at its sole discretion
     by written notice to Columbia, elect to (i) suspend all future funding
     obligations under Section 2.1; and (ii) extend the Royalty Term (including,
     without limitation, the then-current Annual Period). During the suspension
     and extension period, PharmaBio shall continue to receive royalties at the
     rate equal to the royalty amount applicable immediately prior to the
     effective date of the suspension and extension period. If PharmaBio elects
     this remedy, the then operating Annual Period for royalty payments under
     Section 2.2, and the funding commitments under Section 2.1, shall be
     extended until the Minimum Sales Force Level is satisfied or the Adverse
     Marketing Event no longer exists, as the case may be. The funding
     commitments under Section 2.1 shall resume as soon as Columbia achieves the
     Minimum Sales Force Level or the Adverse Marketing Event no longer exists,
     as the case may be, and the end of the then current Annual Period shall be
     extended for the amount of the suspension and extension period, such that
     PharmaBio enjoys the full length of the five (5) Annual Periods described
     in Section 2.2 with the benefit of the Minimum Sales Force Level or absence
     of the Adverse Marketing Event, as the case may be, for five (5) full
     twelve-month periods, and the term "Royalty Term" shall, for all purposes
     under this Agreement, be extended accordingly.

2.5  Each party hereto shall keep or cause to be kept such records as are
     required to determine, in a manner consistent with GAAP, the sums or
     credits due under this Agreement. Each party shall have the right, at such
     party's expense, through a certified public accountant or like person
     reasonably acceptable to the other party, upon execution of a customary
     confidentiality agreement, to examine such records during regular business
     hours upon reasonable notice during the term of this Agreement and for
     twelve (12) months after its termination; provided however, that (i) such
     examination shall not take place more than once a year and shall not cover
     such records for more than the preceding Annual Period, and (ii) such
     accountant shall report to both parties only as to

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       7

<PAGE>

     the accuracy of the reports or payments provided or made by the other party
     under this Agreement. Any adjustments required as a result of overpayments
     or underpayments identified through a party's exercise of examination
     rights, and any other adjustments that may be required from time to time in
     order to correct overpayments or underpayments under this Agreement, shall
     be made by subtracting or adding, as appropriate, amounts from or to the
     next royalty payment in accordance with Section 2.2. The party requesting
     the examination shall bear the full cost of the examination unless such
     examination correctly discloses that the discrepancy for the Annual Period
     differs by more than five (5) percent from the amount the accountant
     determines is correct, in such case the owing party shall pay the
     reasonable fees and expenses charged by the accountant. In the event that a
     party disputes an invoice or other payment obligation under this Agreement,
     such party shall timely pay the amount of the invoice or other payment
     obligation, and the parties shall resolve such dispute in accordance with
     Section 11.

2.6  Without the prior written approval of PharmaBio, Columbia shall not, nor
     shall it allow any Affiliate or third party acting on behalf of or for the
     benefit of Columbia or any Affiliate to, commercialize or promote a product
     that could reasonably be expected to compete with a Product in the
     Territory during the Royalty Term.

2.7  The Chief Financial Officers ("CFOs") of Columbia and PharmaBio shall
     coordinate the activities of the parties under this Agreement. The CFOs
     shall meet or communicate (in person or by telephone conference) on a
     regular basis as may be reasonably requested by either of them, but no less
     frequently than semi-annually about the performance of the parties under
     this Agreement. The parties acknowledge that a Steering Committee will be
     established as described in the Master Services Agreement. The parties
     agree that, in addition to the activities described in the Master Services
     Agreement, the Steering Committee will coordinate and facilitate the
     overall commercialization relationship among PharmaBio and its Affiliates
     and Columbia and its Affiliates, including with respect to this Agreement.

2.8  As further consideration for PharmaBio's funding obligations under this
     Agreement, Columbia hereby makes the representations and warranties set
     forth in Article III of the Stock Purchase Agreement.

2.9  Columbia agrees not to sell, assign, license, lease or otherwise transfer
     all or any substantial portion of its assets or properties owned (or
     otherwise held) relating to Crinone or Prochieve in one or a series of
     related transactions, without the prior written consent of PharmaBio, which
     consent shall not be unreasonably withheld or delayed.

2.10 Without the prior written consent of PharmaBio, which consent shall not be
     unreasonably withheld or delayed, Columbia shall not create or incur or
     allow to be created, incurred or exist any Debt, except Debt which is
     junior and subordinate in right of payment to Columbia's minimum payment
     obligations under Section 2.2 ("Junior Debt"), so long as prior to the
     creation of such Junior Debt the holder thereof has agreed to subordination
     terms and conditions in form and substance reasonably satisfactory to
     PharmaBio providing for the subordination of the Junior Debt to such
     minimum payment obligations.

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                        8

<PAGE>

     Columbia and PharmaBio agree that Columbia's payment obligations under this
     Agreement, including such minimum payment obligations in Section 2.2, shall
     be and constitute "Senior Indebtedness" as such term is used in the 7?%
     Convertible Subordinated Note (No. R-1 $10,000,000) issued by Columbia to
     SBC Warburg Dillon Read Inc. dated March 16, 1998 (including any
     refinancing, replacement, substitution or restatement of such Note).

2.11 Without the prior written consent of PharmaBio, which consent shall not be
     unreasonably withheld or delayed, Columbia shall not create or incur or
     allow to be created, incurred or exist any Lien upon or with respect to any
     of Columbia's assets or properties, except Liens securing Debt or other
     obligations which are junior and subordinate in right of payment to
     Columbia's minimum payment obligations under Section 2.2 ("Junior Liens"),
     so long as prior to the creation of such Junior Liens the holder thereof
     has agreed to subordination terms and conditions in form and substance
     reasonably satisfactory to PharmaBio providing for the subordination of the
     Junior Liens to such minimum payment obligations.

3.0  Confidentiality and Ownership of Information.

3.1  Columbia on the one part and PharmaBio on the other part each acknowledges
     that, in the course of performing its obligations hereunder, it may receive
     information from the other party which is proprietary to the disclosing
     party and which the disclosing party wishes to protect from public
     disclosure ("Confidential Information"). Each receiving party agrees to
     retain in confidence, during the Royalty Term, and thereafter for a period
     of five (5) years, all Confidential Information disclosed to it by or on
     behalf of the other party, and that it will not, without the written
     consent of such other party, use Confidential Information for any purpose
     other than the purposes indicated herein or disclose such information to a
     third party. These restrictions shall not apply to Confidential Information
     which: (i) is or becomes public knowledge (through no fault of the
     receiving party); (ii) is made lawfully available to the receiving party by
     an independent third party that, to the knowledge of the receiving party,
     is under no duty of confidentiality to the disclosing party; (iii) is
     already in the receiving party's possession at the time of receipt from the
     disclosing party (and such prior possession can be demonstrated by
     competent evidence by the receiving party); (iv) is independently developed
     by the receiving party and/or Affiliates (and such independent development
     can be demonstrated by competent evidence by the receiving party); or (v)
     is required by law, regulation, rule, act or order of any governmental
     authority or agency to be disclosed by the receiving party, provided,
     however, if reasonably possible, such receiving party gives the disclosing
     party sufficient advance written notice to permit it to seek a protective
     order or other similar order with respect to such Confidential Information
     and, thereafter, the receiving party may disclose only the minimum
     Confidential Information required to be disclosed in order to comply with
     such and only to the government authority or agency or in the proceeding
     which is the subject of such order.

3.2  PharmaBio on the one hand and Columbia on the other hand shall limit
     disclosure of the other party's Confidential Information to only those of
     their respective officers,

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       9

<PAGE>

     representatives, agents and employees who are directly concerned with the
     performance of this Agreement and have a legitimate need to know such
     Confidential Information in the performance of their duties and shall
     ensure that their respective officers, representatives, agents and
     employees to whom Confidential Information is disclosed do not further
     disclose such Confidential Information to any third party except as
     otherwise permitted hereunder.

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       10

<PAGE>

3.3  All Columbia inventions, processes, know-how, patents, trade secrets,
     copyrights, trade names, trademarks, service marks, marketing materials,
     proprietary materials or other intellectual property of any kind, and all
     improvements to any of the foregoing (collectively, "Columbia Property"),
     disclosed, used, improved, modified or developed in connection with the
     relationship contemplated by this Agreement shall remain the sole and
     exclusive property of Columbia.

3.4  Columbia acknowledges that PharmaBio (and its Affiliates) possess certain
     inventions, processes, know-how, trade secrets, improvements, other
     intellectual properties and other assets, including but not limited to
     analytical methods, procedures and techniques, computer technical expertise
     and software, and business practices, which have been independently
     developed by PharmaBio and/or its Affiliates (collectively "PharmaBio
     Property"). Any PharmaBio Property or improvements thereto which are
     disclosed, used, improved, modified or developed under or during the term
     of this Agreement shall remain the sole and exclusive property of PharmaBio
     or the respective Affiliate.

3.5  Neither PharmaBio nor Columbia or any of their Affiliates shall make any
     public announcements regarding this Agreement or the terms and conditions
     thereof without the prior written approval of the other party, which
     approval shall not be unreasonably withheld or delayed, except to the
     extent such disclosure is required by law.

4.0  Grant of Certain Preferred Rights by Columbia to PharmaBio

4.1  Columbia hereby grants to PharmaBio (which for purposes of this Section
     shall mean and include its Affiliates), for a period of [***]years from the
     date hereof, a preferred provider relationship whereby PharmaBio shall have
     a first and preferred opportunity to negotiate for a period of [***]days
     with Columbia (which for purposes of this Section shall mean and include
     its Affiliates) to provide to Columbia any services which PharmaBio
     provides to customers and which Columbia has decided to outsource or
     otherwise engage a service provider to perform during the Royalty Term,
     including without limitation clinical and pre-clinical development,
     coordination and execution services, sales and marketing services,
     commercialization services, and similar services. Columbia shall allow and
     grant PharmaBio the right to provide such services if PharmaBio agrees to
     provide such services on competitive terms and conditions.

4.2  If at any time during the Royalty Term, Columbia elects to outsource or
     otherwise engage a service provider to perform sales and marketing
     services, commercialization services, or similar services for its product
     known as testosterone progressive hydration buccal, Columbia will not grant
     a third party the right to provide such services without first offering and
     giving PharmaBio and its Affiliates the opportunity to obtain such right
     and attempting in good faith for a period of at least thirty (30) days to
     reach an agreement between the parties for PharmaBio or an Affiliate to
     obtain such right.

5.0  Independent Contractor Relationship.

     For the purposes of this Agreement, Columbia and PharmaBio are independent

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       11

<PAGE>

       contractors and nothing contained in this Agreement shall be construed to
       place them in the relationship of partners, principal and agent, employer
       and employee or joint venturers. Neither Columbia nor PharmaBio shall
       have the power or right to bind or obligate the other party, nor shall
       either party hold itself out as having such authority.

6.0    Termination.

6.1    Columbia may terminate this Agreement for material breach upon sixty (60)
       days written notice specifying the nature of the breach, if such breach
       (i) has not been substantially cured within the sixty (60) day period or
       (ii) is not curable within such 60-day period and the breaching party has
       not commenced and diligently continued during such 60-day period
       reasonable actions to cure such breach. During the 60-day cure period for
       termination due to breach, each party will continue to perform its
       obligations under this Agreement. Any termination under this Section 5
       shall be without prejudice to any claims for damages or other relief by
       Columbia.

6.2    This Agreement shall terminate upon the payment by Columbia to PharmaBio
       of the Maximum Royalty Commitment.

7.0    Indemnification and Liability Limits.

7.1    PharmaBio shall indemnify, defend and hold harmless Columbia, its
       Affiliates and its and their respective directors, officers, employees
       and agents from and against any and all losses, claims, actions, damages,
       liabilities, penalties, costs and expenses (including reasonable
       attorneys' fees and court costs) (collectively, "Losses"), resulting from
       any: (i) breach by PharmaBio (or its employees) of its obligations
       hereunder; (ii) willful misconduct or grossly negligent acts or omissions
       of PharmaBio or its employees; and (iii) violation by PharmaBio or its
       employees of any municipal, county, state or federal laws, rules or
       regulations applicable to the performance of PharmaBio's obligations
       under this Agreement; except, in each case, to the extent such Losses are
       determined to have resulted from the gross negligence or willful
       misconduct of Columbia or its employees.

7.2    Columbia shall indemnify, defend and hold harmless PharmaBio, its
       Affiliates and its and their respective directors, officers, employees
       and agents from and against any and all Losses resulting from any: (i)
       third party claim arising from the manufacture, storage, handling,
       packaging, labeling, production, transportation, distribution, marketing,
       testing, use, sale or other disposition of the Products; (ii) breach by
       Columbia (or its employees) of its obligations hereunder; (iii) willful
       misconduct or grossly negligent acts or omissions of Columbia or its
       employees; and (iv) violation by Columbia or its employees of any
       municipal, county, state or federal laws, rules or regulations applicable
       to the performance of Columbia' obligations under this Agreement, except,
       in each case, to the extent such Losses are determined to have resulted
       from the gross negligence or willful misconduct of PharmaBio or its
       employees.

7.3    In the event of a third party claim or lawsuit, the party seeking
       indemnification hereunder (the "Indemnified Party") shall give the party
       obligated to indemnify (the "Indemnifying

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       12

<PAGE>

       Party") prompt written notice of any claim or lawsuit (including a copy
       thereof), provided that the failure of an Indemnified Party to notify the
       Indemnifying Party on a timely basis will not relieve the Indemnifying
       Party of any liability that it may have to the Indemnified Party unless
       the Indemnifying Party demonstrates that the defense of such action is
       materially prejudiced by the Indemnified Party's failure to give such
       notice. The Indemnified Party and its employees shall fully cooperate
       with Indemnifying Party and its legal representatives in the
       investigation and defense of any matter the subject of indemnification,
       which defense shall be managed by the Indemnifying Party in a manner,
       including the selection of legal counsel, reasonably acceptable to the
       Indemnified Party. The Indemnified Party shall not unreasonably withhold
       its approval of the settlement of any such claim, liability, or action by
       Indemnifying Party covered by this indemnification provision; provided
       that such settlement does not include an admission or acknowledgement of
       liability or fault of the Indemnified Party.

7.4    Neither PharmaBio nor Columbia, nor any of such party's Affiliates,
       directors, officers, employees, subcontractors or agents shall have,
       under any legal theory (including, but not limited to, contract,
       negligence and tort liability), any liability to any other party hereto
       for any loss of profits, opportunity or goodwill, or any type of special,
       incidental, indirect or consequential damage or loss, in connection with
       or arising out of this Agreement. For the avoidance of doubt, a claim by
       PharmaBio for royalties on Net Sales payable by Columbia hereunder or a
       claim by Columbia for payments pursuant to Section 2.1 shall not be
       limited in any way pursuant to the provisions set forth in the preceding
       sentence.

8.0    Notices.

       Any notice required to be given by either party shall be in writing. All
       notices shall be to the parties and addresses listed below, and shall be
       deemed sufficiently given (i) when received, if delivered personally or
       sent by facsimile transmission with confirmed receipt, or (ii) one
       business day after the date mailed by first class mail or sent by an
       internationally recognized overnight delivery service with charges
       prepaid.

       If to PharmaBio:           PharmaBio Development Inc.
                                  4709 Creekstone Drive
                                  Suite 200, Riverbirch Building
                                  Durham, NC 27703
                                  Attention: President
                                  Fax: 919-998-2090

       With a copy to:            PharmaBio Development Inc.
                                  4709 Creekstone Drive
                                  Suite 200, Riverbirch Building
                                  Durham, NC 27703
                                  Attention: General Counsel
                                  Fax: 919-998-2090

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       13

<PAGE>

         If to Columbia:            Columbia Laboratories, Inc.
                                    220 South Orange Avenue
                                    Livingston, NJ 07039
                                    Attention: President
                                    Fax 973-994-3001

         With a copy to:            Columbia Laboratories, Inc.
                                    220 South Orange Avenue
                                    Livingston, NJ 07039
                                    Attention: General Counsel
                                    Fax 973-994-3001

9.0      Assignment.

         No party may assign any of its rights or obligations under this
         Agreement to any third party other than an Affiliate without the
         written consent of the other party, except that Columbia may assign its
         rights or obligations under this Agreement with respect to Advantage-S
         or RepHresh to a bona fide third party that acquires all of Columbia's
         business with respect to Advantage-S or RepHresh provided that such
         party assumes all of Columbia's applicable rights and obligations under
         this Agreement in form and substance reasonably satisfactory to
         PharmaBio; provided, however, that Columbia may not in any event assign
         its minimum payment obligations under Section 2.2 hereof. PharmaBio may
         at any time assign or transfer any of its rights or obligations under
         this Agreement to an Affiliate. Nothing in this Section 8.0 shall
         preclude the transfer of a party's rights and obligations under this
         Agreement in conjunction with a merger in which such party is not the
         surviving entity. Any attempted assignment in violation of this Section
         shall be null and void.

10.0     General Provisions.

10.1     Sections 2.1, 2.2, 2.5, 3.0, 7.0, 9.0, 10.0 and 11.0 shall survive the
         termination of this Agreement for any reason.

10.2     This Agreement contains the entire understanding of the parties with
         respect to the subject matter herein and cancels all previous
         agreements (oral and written), negotiations and discussions dealing
         with the same subject matter. The parties, from time to time during the
         term of this Agreement, may modify any of the provisions hereof only by
         an instrument in writing duly executed by the parties.

10.3     No failure or delay on the part of a party in either exercising or
         enforcing any right under this Agreement will operate as a waiver of,
         or impair, any such right. No single or partial exercise or enforcement
         of any such right will preclude any other or further exercise or
         enforcement thereof or the exercise or enforcement of any other right.
         No waiver of any such right will have effect unless given in a signed
         writing. No waiver of any such right will be deemed a waiver of any
         other right. The rights and remedies set forth in this Agreement are
         cumulative and not exclusive of any rights or remedies provided by law
         or

     [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
             SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       14

<PAGE>

         otherwise. Termination of this Agreement by a party shall not affect
         any other rights or remedies which may be available to such party
         against a defaulting party.

10.4     If any part or parts of this Agreement are held to be illegal, void or
         ineffective, the remaining portions of this Agreement shall remain in
         full force and effect. If any of the terms or provisions are in
         conflict with any applicable statute or rule of law, then such term(s)
         or provision(s) shall be deemed inoperative to the extent that they may
         conflict therewith, and shall be deemed to be modified or conformed
         with such statute or rule of law. In the event of any ambiguity
         respecting any term or terms hereof, the parties agree to construe and
         interpret such ambiguity in good faith in such a way as is appropriate
         to ensure its enforceability and viability.

10.5     The headings contained in this Agreement are used only as a matter of
         convenience, and in no way define, limit, construe or describe the
         scope or intent of any section of this Agreement.

10.6     Each party represents and warrants to the other that the individual
         signing below for such party is authorized and empowered to bind such
         party to the terms of this Agreement.

10.7     Neither party shall be liable to the other for delay or failure in the
         performance of the obligations on its part contained in this Agreement
         (other than payment obligations) if and to the extent that such failure
         or deal is due to circumstances beyond its control ("Force Majeure")
         which it could not have avoided by the exercise of reasonable diligence
         including but no limited to: act of God; war or insurrection; civil
         commotion; destruction of essential facilities or materials by
         earthquake, fire, flood or storm; labor disturbance (whether or not any
         such labor disturbance is within the power of the affected party to
         settle); epidemic; or other similar event; provided, however, that the
         party so affected shall notify the other party promptly should such
         circumstances arise, giving an indication of the likely extent and
         duration thereof, and shall use all commercially reasonable efforts to
         avoid, remove or alleviate such causes of non-performance and shall
         resume performance of its obligations hereunder with the utmost
         dispatch whenever such causes are removed. In the event of force
         majeure lasting more than three (3) months, the parties agree to meet
         and discuss how this Agreement can be justly and fairly implemented
         under the circumstances.

11.0     Dispute Resolution:

11.1     Governing Law. This Agreement, including, without limitation, the
         interpretation, performance, enforcement, breach or termination thereof
         and any remedies relating thereto, shall be governed by and construed
         in accordance with the laws of the State of Delaware, United States of
         America, as applied to agreements executed and performed entirely in
         the State of Delaware, without regard to conflicts of law rules.

11.2     Internal Review. In the event that a dispute, difference, claim,
         action, demand, request, investigation, controversy, threat, or request
         for testimony or information or other question arises pertaining to any
         matters which arise under, out of, in connection with, or

    [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
            SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       15

<PAGE>

         in relation to this Agreement (a "Dispute") and either party so
         requests in writing, prior to the initiation of any formal legal
         action, the Dispute will be submitted to the Chief Executive Officers
         of Columbia and PharmaBio. For all Disputes referred to the Chief
         Executive Officers, the Chief Executive Officers shall use their good
         faith efforts to meet at least two times in person and to resolve the
         Dispute within ten (10) days after such referral.

11.3     Arbitration.

         (a)      If the parties are unable to resolve any Dispute under Section
                  10.2, then either party may by election within ten (10) days
                  after the end of the period set forth in Section 10.2, require
                  the matter to be settled by final and binding arbitration by
                  sending written notice of such election to the other party
                  clearly marked "Arbitration Demand". Thereupon such Dispute
                  shall be arbitrated in accordance with the terms and
                  conditions of this Section 10.3. Notwithstanding the
                  foregoing, either party may apply to a court of competent
                  jurisdiction for a temporary restraining order, a preliminary
                  injunction, or other equitable relief to preserve the status
                  quo or prevent irreparable harm.

         (b)      The arbitration panel will be composed of three arbitrators,
                  one of whom will be chosen by Columbia, one by PharmaBio, and
                  the third by the two so chosen. If both or either of Columbia
                  or PharmaBio fails to choose an arbitrator or arbitrators
                  within fourteen (14) days after receiving notice of
                  commencement of arbitration, or if the two arbitrators fail to
                  choose a third arbitrator within fourteen (14) days after
                  their appointment, the American Arbitration Association shall,
                  upon the request of both or either of the parties to the
                  arbitration, appoint the arbitrator or arbitrators required to
                  complete the panel. The arbitrators shall have reasonable
                  experience in the matter under dispute. The decision of the
                  arbitrators shall be final and binding on the parties, and
                  specific performance giving effect to the decision of the
                  arbitrators may be ordered by any court of competent
                  jurisdiction.

         (c)      Nothing contained herein shall operate to prevent either party
                  from asserting counterclaim(s) in any arbitration commenced in
                  accordance with this agreement, and any such party need not
                  comply with the procedural provisions of this Section 10.3 in
                  order to assert such counterclaim(s).

         (d)      The arbitration shall be filed with the office of the American
                  Arbitration Association ("AAA") located in Delaware or such
                  other AAA office as the parties may agree upon (without any
                  obligation to so agree). The arbitration shall be conducted
                  pursuant to the Commercial Arbitration Rules of AAA as in
                  effect at the time of the arbitration hearing, such
                  arbitration to be completed in a sixty (60) day period. In
                  addition, the following rules and procedures shall apply to
                  the arbitration:

    [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
            SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       16

<PAGE>

                  (i)      The arbitrators shall have the sole authority to
                           decide whether or not any Dispute between the parties
                           is arbitrable and whether the party presenting the
                           issues to be arbitrated has satisfied the conditions
                           precedent to such party's right to commence
                           arbitration as required by this Section 10.3.

                  (ii)     The decision of the arbitrators, which shall be in
                           writing and state the findings the facts and
                           conclusions of law upon which the decision is based,
                           shall be final and binding upon the parties, who
                           shall forthwith comply after receipt thereof.
                           Judgment upon the award rendered by the arbitrator
                           may be entered by any competent court. Each party
                           submits itself to the jurisdiction of any such court,
                           but only for the entry and enforcement to judgment
                           with respect to the decision of the arbitrators
                           hereunder.

                  (iii)    The arbitrators shall have the power to grant all
                           legal and equitable remedies (including, without
                           limitation, specific performance) and award
                           compensatory damages provided by applicable law, but
                           shall not have the power or authority to award
                           punitive damages. No party shall seek punitive
                           damages in relation to any matter under, arising out
                           of, or in connection with or relating to this
                           Agreement in any other forum.

                  (iv)     The parties shall bear their own costs in preparing
                           for and participating in the resolution of any
                           Dispute pursuant to this Section 10.3, and the costs
                           of the arbitrator(s) shall be equally divided between
                           the parties; provided, however, that each party shall
                           bear the costs incurred in connection with any
                           Dispute brought by such party that the arbitrators
                           determine to have been brought in bad faith.

         IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto through their duly authorized officers as of the date first set forth
above.

PHARMABIO DEVELOPMENT INC.               COLUMBIA LABORATORIES, INC.


By:    /S/ Ronald J. Wooten              By:    /S/ Fred Wilkinson
       ----------------------------             ------------------------

Name:  Ronald J. Wooten                  Name:  Fred Wilkinson
       ----------------------------             ------------------------

Title: President                         Title: President & CEO
       ----------------------------             ------------------------

       7/31/02                                  7/31/02

    [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
            SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                                       17