EXHIBIT 10.42

                    BIOPROGRESS TECHNOLOGY INTERNATIONAL INC

                                       and

                                FARMASIERRA, S.A.


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                            PATENT LICENCE AGREEMENT
                       -----------------------------------
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DATE: July 10, 2001

PARTIES:

1 'The Licensor': BIOPROGRESS TECHNOLOGY INTERNATIONAL INC, a corporation
organised under the laws of the State of Nevada, United States of America, of
Unit 1, Norwood Road, March, Cambridgeshire, PE15 8QD, England, and

2 'The Licensee': FARMASIERRA, S.A. a Spanish company whose registered office is
at Carretera de Irun, Km, 26,200 28700 San Sebastian de los Reyes, Madrid,
Spain.

RECITALS:

(A) The Licensor has developed and is the beneficial owner of the rights of
confidence in and has possession of a substantial body of valuable Technical
Information (as defined below) relating to the manufacture, assembly, and
commercial operation of the Products (as defined below) and is the beneficial
owner of the Patents (as defined below).

(B) The Licensee wishes to receive and the Licensor is willing to grant a
licence on the terms and conditions hereinafter set forth to use such
information and to work under the said Patents in order to manufacture, use,
sell or otherwise deal in the Products.

OPERATIVE PROVISIONS:

1 Definitions

In this Agreement the following terms shall have the following meanings unless
the context otherwise requires:

(a) 'Affiliate' - any holding company or subsidiary, or any other subsidiary of
a holding company, of the party in question, the expressions 'holding company'
and 'subsidiary' having the meanings in s.736 of the Companies Act 1985

(b) 'Anniversary Date' - in respect of each Machine means the date referred
to in clause 5.2.3 or 5.3.1 (as appropriate)

(c) 'Confidential Items' those parts of the Machine and items of tooling for
the Machine which are listed in Schedule 4

(d) 'Confidential Information' - all information which is commercially sensitive
or of a secret nature (including the Technical Information) or information which
is marked confidential or which is orally stated to be confidential relating to
any and all aspects of either party

(e) 'Copyright' - all copyright and rights in the nature of copyright to which
either party may now be or may subsequently become entitled in or in respect of
all drawings and other documents, recordings in any form and all other materials
bearing or embodying any part of the Technical Information including without
limitation any such materials consisting of or containing software or databases

(f) 'Effective Date' - the date of this Agreement
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(g) 'Expert' - means a person to whom a reference is made under clause 17

(h) 'Film Supplier' - means the party referred to as "the Company" in the Film
Supply Agreement or any other party to whom the rights and obligations of "the
Company" under the Film Supply Agreement may have been validly assigned under
that agreement

(i) 'Film Supply Agreement' - means the agreement specifying the terms under
which film is supplied.

(j) 'Improvements' - all improvements, modifications or adaptations to the
Products or the process for manufacturing the Products which may be made or
acquired by either party during the term of this Agreement

(k) 'Machines' - the Company's Swallow series form fill and seal powder
encapsulation machine as specified in the machine supply Agreement.

(l) 'Patents' -

      (i) the patent applications short particulars of which are set out in
      Schedule 1 hereto;

      (ii) all patent applications that may hereafter be filed by or on behalf
      of the Licensor which either are based on or claim priority from any of
      the foregoing patent applications, or which relate in any other way to the
      Products or the Technical Information, or which are in respect of any
      Improvements to which the Licensor is exclusively entitled and which the
      Licensor is due to disclose to the Licensee under clause 4.1 below;

      (iii) all patents which may be granted pursuant to any of the foregoing
      patent applications

(m) 'Products' - any construction using in part or in whole the XGel Materials
and forming an ingestible containment device for non-aqueous liquids, solids,
minerals, pastes or powders to be sold as prescription products

(n) 'Solicitors' - Messrs Rustons & Lloyd of 136 High Street, Newmarket,
Suffolk CB8 8NN

(o) 'Technical Information' - all identifiable know-how, experience, data and
all other technical or commercial information relating to the Products or the
manufacture of the Products using the Machines and/or the XGel Materials whether
in human or machine readable form and whether stored electronically or otherwise
and which might reasonably be of commercial interest to either party in the
design manufacture or supply of the Products

(p) 'XGel Materials' - any materials the manufacture or preparation of which
uses in whole or in part any of the Patents or the Technical Information or
Copyright the specification of which is designed for oral use by customers and
where the active contents are to be released after the end product has been
swallowed

(q) 'XGel Technical Information' - means all of the Technical Information
which relates to the XGel Materials
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(r) 'XGel Trade Mark' -the trade mark "XGel" owned by the Licensor.

2     Technical information

2.1 Promptly after the signing of this Agreement by both parties the Licensor
will supply the Licensee with all Technical Information in its possession that
has not previously been disclosed that is reasonably necessary or desirable to
enable the Licensee to manufacture on a commercial scale and sell the Products.

2.2 The Licensee undertakes that for so long as any part of the Technical
Information remains subject to the obligations of confidence of clause 8 hereof
it will not use the same for any purpose except as expressly permitted in this
Agreement.

3     Grant of rights

3.1 The Licensor hereby grants to the Licensee a licence under the Patents, the
Technical Information and Copyright:

      3.1.1 to manufacture Prescription Products; and

      3.1.2 to use sell or otherwise deal in Prescription Products manufactured
      under the licence.

3.2 The parties hereto agree to execute a formal licence agreement substantially
as set out in Schedule 2 hereto for the purposes of registering any patent
licence granted.

3.3 The Licensee shall be entitled to sub-license any Affiliate of the Licensee
for so long as it is such an Affiliate under the rights granted or to be granted
under clauses 3.1 and 3.2 hereof provided that:

      3.4.1 the sub-licence shall be in writing and shall contain obligations on
      the sub-licensee at least as onerous as those set out herein; and

      3.4.2 the Licensee shall remain responsible for all acts and omissions of
      such sub-licensees as though they were by the Licensee; and

      3.4.3 the Licensee shall forthwith notify the Licensor in writing of any
      sub-licence granted pursuant to this clause and shall at the same time
      provide the Licensor with a copy of such sub-licence.

3.5 For the avoidance of doubt, it is hereby declared that the Licensee shall
have no right hereunder to manufacture use or sell the Products otherwise than
as expressly licensed to the Licensee hereby.

3.6 The Licensor will not for the term of this Agreement manufacture, supply or
otherwise deal in any of the Products and (except in accordance with clause 3.3
shall not license any third parties to do the same.

3.7 For the avoidance of doubt, and subject to clause 3.10 nothing in this
Agreement shall be construed or implied as a licence or grant of rights by the
Licensor to the Licensee under the Patents or in respect of the Technical
Information or Copyrights other than for the construction, manufacture,
promotion, sale and distribution of the Products.
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3.8 The Licensor hereby grants the Licensee the right to manufacture or have
manufactured all such parts and tooling (other than the Confidential Items) as
may be necessary to repair and maintain the Machines or produce the Products and
the Licensor hereby grants to the Licensee a non-exclusive licence (together
with the right to sub-licence) under the Patents, Technical Information and
Copyright as may be necessary for this purpose, including the right to
sub-licence such third party as the Licensee may require to enable such third
party to design and manufacture such parts and tooling.

3.9 Within [CONFIDENTIALITY REQUESTED] days of the date of execution of this
Agreement the Licensor will deposit with the Solicitors at their offices at 136
High Street, Newmarket, Suffolk CB8 8NN or such other address as they shall from
time to time in writing indicate to the Licensor and the Licensee one copy of
the XGel Technical Information.

3.10 Within [CONFIDENTIALITY REQUESTED] days of the date of any modification
enhancement revision or update to the XGel Technical Information the Licensor
will deposit with the Solicitors a revised copy of the whole (or the relevant
part) of the Xgel Technical Information incorporating such modification,
enhancement, revision or update (as the case may be).

3.11 The Licensor will procure that the Solicitors provide an undertaking to the
Licensor and the Licensee on the date hereof in the form attached at Schedule 5.

3.12 A "Relevant Event" shall have occurred for the purpose of this clause 3 if:

      3.14.1 the Licensor shall convene a meeting of its creditors or if a
      proposal shall be made for a voluntary arrangement within part I of the
      Insolvency Act 1986 or a proposal for any other composition scheme or
      arrangement with (or assignment for the benefit of) its creditors or if
      the Licensor or the Film Supplier shall be unable to pay its debts within
      the meaning of section 123 of the Insolvency Act 1986 or if a trustee
      receiver administrative receiver of similar officer is appointed in
      respect of all or any part of the business or assets of the Licensor or
      the Film Supplier or if a petition is presented or a meeting is convened
      for the purpose of considering a resolution or other steps are taken for
      the winding up of the Licensor or the Film Supplier or for the making of
      an administration order (otherwise than for the purpose of an amalgamation
      or reconstruction); or

      3.14.2 any of the events referred to in clause 3.14.1 occurs to the Film
      Supplier (in circumstances where the Film Supplier and Licensor are
      different legal persons) and the Licensor fails to make arrangements which
      ensure that the Licensee receives an uninterrupted supply of the Goods (as
      defined in the Film Supply Agreement) pursuant to the terms of the Film
      Supply Agreement.

3.15 In order to obtain the release of the XGel Technical Information the
Licensee shall forthwith upon becoming aware of a Relevant Event prepare and
submit to the Solicitors a statutory declaration, which shall:

      3.15.1 be sworn by a duly authorised officer of the Licensee;
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      3.15.2 set out fully the facts and circumstances of the Relevant Event;
      and

      3.15.3 have attached thereto all relevant supporting documentation in the
      Licensee's possession.

3.16 In the case of a Relevant Event falling under clause 3.14.1 above the
Solicitor is hereby authorised to release the XGel Technical Information to the
Licensee upon receipt of a statutory declaration in the form specified in clause
3.15 above.

3.17 In the case of a Relevant Event falling under any of clauses 3.14.2 or
3.14.3 or 3.14.4 above the Solicitor shall submit a copy of the Licensee's
statutory declaration to the Licensor forthwith upon receiving the same. If the
Licensor does not either:

      3.17.1 remedy, or procure that the Film Supplier remedies the breach or
      failure giving rise to the Relevant Event; or

      3.17.2 by written notice (setting out all relevant facts and circumstances
      and having attached thereto all relevant documentation in the Licensor's
      possession) deny its occurrence within thirty days of receipt by the
      Licensor of the Licensee's copy statutory declaration then the Solicitors
      are hereby authorised upon expiry of the said thirty days (and subject to
      the said statutory declaration complying with the provisions of clause
      3.15 above) to release the Xgel Technical Information to the Licensee.

3.18 If the Licensor denies the occurrence of a Relevant Event by written notice
pursuant to clause 3.17.2 above:

      3.18.1 the Solicitors shall not release the XGel Technical Information;

      3.18.2 the Solicitors shall forthwith submit a copy of the Licensor's
      written notice to the Licensee;

      3.18.3 each of the Licensor and the Licensee hereby agrees to use its best
      endeavours to reach agreement upon whether or not a Relevant Event within
      the terms of any of clauses 3.14.2 or 3.14.3 or 3.14.4 above has taken
      place within fourteen days of the date of receipt by the Licensee of the
      Licensor's notice referred to in clause 3.17.2 above in default of which
      the matter shall be referred for determination by the Expert; and

      3.18.4 if it is agreed by the parties pursuant to clause 3.18.3 above or
      decided by the Expert that a Relevant Event has occurred within the terms
      of clauses 3.14.2 or 3.14.3 or 3.14.4 above then the Solicitor is hereby
      authorised to release the XGel Technical Information to the Licensee.

3.19 Upon receipt of the XGel Technical Information the Licensee shall be
entitled to use and/or develop the XGel Technical Information and to grant
sub-licences under all or any part of the XGel Technical Information to the
extent necessary to enable the Licensee to have the XGel Materials manufactured
on its behalf for use only in the Products pursuant to the terms of this
Agreement.

3.20 The Licensor represents and warrants to the Licensee that subject to the
time limit for depositing revisions to the XGel Technical Information set out in
clause 3.12 above the XGel Technical Information deposited with

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the Solicitors shall at all times be complete accurate and up-to-date.

3.21 Any charge made by the Solicitors in respect of the storage of the XGel
Technical Information will be met by the Licensor.

4     Improvements

4.1 Each party shall forthwith disclose to the other in confidence and in such
detail as that other may reasonably require all Improvements that it may develop
or acquire during the term of this Agreement except in so far as such disclosure
would disclose information derived from and subject to confidentiality
obligations in favour of a third party.

4.2 Improvements that the Licensor is due to disclose to the Licensee under
clause 4.1 above shall be deemed to be part of the Technical Information for the
purposes of the rights granted to the Licensee under clause 3 hereof.

4.3 The Licensor shall have a non-exclusive irrevocable world-wide royalty-free
licence without limit of time with the right to assign and to grant sub-licences
thereunder to use all Improvements the Licensee is due to disclose to the
Licensor under clause 4.1 hereof and to use and exploit all intellectual
property rights in respect thereof owned by the Licensee or any assign or
successor in title of the Licensee.

4.4 Save as otherwise provided herein, Improvements arising from work carried
out by the Licensor alone shall remain the exclusive property of the Licensor
and Improvements arising from work carried out by the Licensee alone shall
remain the exclusive property of the Licensee.

4.5 Subject to clause 9.7 below, Improvements arising from work carried out
jointly shall belong to the parties equally unless they shall otherwise agree.
Each party shall have the irrevocable right to use such joint Improvements
independently of the other and to the extent necessary for such use each shall
grant to the other a royalty free worldwide irrevocable perpetual non-exclusive
licence under all jointly held intellectual property rights relating thereto
including the right to assign and to grant sub-licences thereunder. Each party
undertakes that on request it will confirm to any prospective licensee of the
other the right of that other to grant such a licence pursuant to this clause.

5 Licence fees and payment

5.1 The provisions of this clause 5 apply unless otherwise agreed in writing
between the parties.

5.2 In consideration for the rights granted to the Licensee under clause 3, and
subject to the provisions of clauses 5.3 to 5.6 (inclusive), the Licensee shall
pay a licence fee to the Licensor for each Machine purchased by the Licensee.
Such fee shall be calculated in accordance with the table set out in Schedule 3
by reference to the total number of Machines ordered by the Licensee on the date
the order in question is placed. For the purposes of applying the said table the
following provisions shall apply in respect of each individual Machine purchased
by the Licensee:

      5.2.1 the first year for licence fee purposes shall begin on the date the
      order for the Machine in question is placed by the Licensee. Subsequent
      years shall begin on each subsequent anniversary thereof;
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      5.2.2 the licence fee for the first year shall be paid as to
      [CONFIDENTIALITY REQUESTED]% on the date the order for the Machine in
      question is placed by the Licensee, and as to the balance when the said
      Machine is accepted by the Purchaser; and

      5.2.3 licence fees for subsequent years shall be paid in full in respect
      of each Machine no later than the anniversary of the date of acceptance by
      the Purchaser of the said Machine (being known as "the Anniversary Date"
      in respect of each such Machine).

5.3 Payments

      5.3.1 the Licence fee for the first year shall be $[CONFIDENTIALITY
      REQUESTED]

      5.3.2 licence fees for subsequent years shall be paid in full no later
      than the Anniversary Date in the year in question.

5.4 The Licensee may at any time give not less than three months notice to the
Licensor (such notice to expire on the relevant Anniversary Date) that a Machine
is no longer required and/or used by the Licensee and with effect from the
relevant Anniversary Date, no licence fee shall be payable in respect of such
Machine. The Licensor will use all reasonable endeavours during the period of
notice to assist the Licensee to find a purchaser for and to sell such Machine.

5.5   All sums due under this Agreement:

      5.5.1 are exclusive of any value added tax which, if applicable, shall be
      payable in addition subject to the provision by the Licensor of an
      appropriate value added tax invoice,

      5.5.2 shall be made in US dollars to the credit of such bank account
      as the Licensor may specify in writing at any time, and

      5.5.3 shall be made in full without deduction of taxes charges and other
      duties that may be imposed except in so far as any such deduction may be
      credited in full by the Licensor against the Licensor's own tax
      liabilities. The parties agree to co-operate in all respects necessary to
      take advantage of such double taxation agreements as may be available.

5.6 If any sum due hereunder is not paid on the due date then, without prejudice
to any other remedies the Licensor may have in that event, the Licensee shall
pay interest on the overdue amount at the rate of 4% above the base rate from
time to time of Barclays Bank plc from the date payment was due until the date
it is made.

6 Performance

6.1 During the continuance of this Agreement the Licensee shall

6.1.1 use all reasonable endeavours to promote the distribution and sale of
Products as widely as its resources reasonably permit and will make available
all necessary selling and manufacturing facilities to meet all reasonable
demands for Products. The Licensee shall seek to maximise such demand,
consistent only with the Licensee obtaining a reasonable rate of

<PAGE>

return on its assets employed in making and selling Products,

6.1.2 ensure that all Products supplied by the Licensee meet all such reasonable
specifications as the Licensor may from time to time reasonably apply thereto
and satisfy in performance quality construction and use the reasonable
requirements of the Licensor and shall upon reasonable notice from the Licensor
give the Licensor or its authorised representative free access at any reasonable
time to the premises of the Licensee for the purpose of ensuring that the
Licensee is observing these obligations (provided that the Licensor shall not
alter the specification more than once in any twelve month period except where
such change is required by law),

6.1.3 sell Products to any suitable buyer independently of any other
products of the Licensee if so required,

6.1.4 ensure that all literature relating to Products prepared by the Licensee
and packaging of the Products manufactured or sold by the Licensee bears an
acknowledgement in English (or such other language as may be the prime language
on the literature or packaging in question) which reads "This Product is
manufactured using the XGel(tm) film system under licence from BioProgress
Technology International Inc" (or such other wording as the parties may from
time to time agree in writing) in typeface of a reasonably legible size, and

6.1.5 not act as agent of the Licensor and specifically not give any indication
that it is acting otherwise than as principal and in advertising or selling
Products not make any representation or give any warranty on behalf of the
Licensor.

6.2 The Licensee shall at its own expense register or procure the registration
of any licence agreement executed under clause 3.5 hereof within 28 days of the
Effective Date and shall notify the Licensor in writing of the recordal of such
registration at the appropriate patent office.

6.3 During the term of this Agreement, the Licensor shall:

      6.3.1 co-operate with the Licensee, at the Licensee's request, in
      developing technical or other data, including data substantiating
      labelling or advertising claims for the XGel Materials;

      6.3.2 co-operate with the Licensee, at the Licensee's request and expense,
      if any, in obtaining all necessary foreign governmental approvals within
      the Territory, including safety approvals, for the sale or use of the
      Products in the Territory;

      6.3.3 generally, do all things that in the opinion of the Licensee are
      reasonably and commercially necessary to assist the Licensee in the
      performance of its obligations hereunder; and

      6.3.4 use all reasonable endeavours promptly to correct any errors in the
      Technical Information, Copyright or Patents subsequently discovered by the
      Licensor, or by the Licensee, which the Licensee notifies in writing to
      the Licensor.

7     Representations and warranties
<PAGE>

7.1 The Licensor represents and warrants to the Licensee as follows:-

      7.1.1 It has the full power and the authority to enter into this Agreement
      and to fully perform its obligations hereunder.

      7.1.2 Neither the execution and the delivery of this Agreement nor the
      performance or compliance by the Licensor with any of its obligations
      hereunder will conflict with or result in the breach of the terms of, or
      constitute a default under, the Articles of Incorporation or Bylaws of the
      Licensor or any material agreement to which the Licensor is a party or by
      which it is bound.

      7.1.3 It has good right to the legal and beneficial ownership of the
      Machine, the XGel Materials, Technical Information, Copyright and the
      Patents ("Licensed Technology").

      7.1.4 The Licensed Technology does not, to the best of its knowledge and
      belief having made all reasonable enquiries, infringe any existing patent,
      published application for a patent, copyright, design right or other
      intellectual property right whatsoever in the Territory.

      7.1.5 The Licensor is not aware, to the best of its knowledge and belief
      having made reasonable enquiries, of any reason why the patent
      applications within the Patents should not be granted in full as patents
      in the territories in which applications have been filed in the form it is
      in at today's date.

      7.1.6 The Licensor is the sole applicant of the patent applications within
      the Patents and the patent applications are subsisting.

      7.1.7 All Technical Information and information relating to the Patents
      has been (or will pursuant to clause 2.1 be) disclosed and is accurate.

7.2 The Licensee represents and warrants to the Licensor as follows:-

      7.2.1 It has the full power and the authority to enter into this Agreement
      and to fully perform its obligations hereunder.

      7.2.2 Neither the execution and the delivery of this Agreement nor the
      performance or the compliance by the Licensee with any of its obligations
      hereunder will conflict with or result in the breach of the terms of, or
      constitute a default under, the Articles of Incorporation or Bylaws of the
      Licensee or any material agreement to which the Licensee is a party or by
      which it is bound.

8     Confidentiality

8.1 Each party agrees to maintain secret and confidential all Confidential
Information obtained from the other both pursuant to this Agreement and prior to
and in contemplation of it and all other information that it may acquire from
the other in the course of this Agreement, to use the same exclusively for the
purposes of this Agreement, and to disclose the same only to those of its
employees and sub-licensees pursuant to this Agreement (if any) to whom and to

<PAGE>

the extent that such disclosure is reasonably necessary for the purposes of this
Agreement.

8.2 The foregoing obligations of clause 8.1 above shall not apply to
Confidential Information or other information which

      8.1.1 prior to receipt thereof from one party was in the possession of the
      recipient party and at its free disposal,

      8.1.2 is subsequently disclosed to the recipient party without any
      obligations of confidence by a third party who has not derived it directly
      or indirectly from the disclosing party,

      8.1.3 is or becomes generally available to the public in the Territory
      through no act or default of the recipient party or its agents or
      employees, or

      8.1.4 is required by a binding court order or otherwise by law to be
      disclosed.

8.2 Notwithstanding the foregoing provisions the parties and any sub-licensees
pursuant to this Agreement shall be entitled to disclose Confidential
Information of the other to actual or potential customers for Products in so far
as such disclosure is reasonably necessary to promote the sale or use of
Products.

8.4 Each party shall procure that all its employees and sub-licensees pursuant
to this Agreement (if any) who have access to any information of the other to
which the obligations of clause 8.1 apply shall be made aware of and subject to
these obligations and shall further procure that so far as is reasonably
practicable all of such employees and sub-licensees shall enter into written
undertakings in favour of the other party to this end in a form previously
approved by the Licensor.

9     Patents and other intellectual property

9.1 If the Licensee becomes aware of any infringement of the Patents or
Copyright or misuse of the Technical Information it shall promptly notify the
Licensor and provide all details within its knowledge. The Licensee shall also
provide the Licensor with all assistance reasonably requested by the Licensor
and at the Licensor's cost for the purposes of any infringement action the
Licensor may bring.

9.2 The Licensor shall use all reasonable endeavours to take any action
regarding any infringements, at its own cost save that the Licensor shall not be
obliged to instigate legal proceedings unless a patent or other suitable
intellectual property counsel of at least 10 years' calling (to be appointed in
default of agreement between the parties at the request of either of them by the
President for the time being of the Law Society) has advised in writing that the
Licensor has a good arguable case against the infringer.

9.3 If the Licensor fails within a reasonable period of time in the
circumstances to take such steps as may reasonably be considered necessary or
appropriate by the Licensee in respect of any infringement of the Patents or
Copyright or mis-use of the Technical Information, the Licensee shall have the
right and is hereby authorised by the Licensor to take those steps
independently. In so doing the Licensee shall not be taken as acting as the

<PAGE>

agent or in any way on behalf of the Licensor but the Licensor shall give all
reasonable assistance, including lending its name as a party to any proceedings,
at the Licensee's expense to facilitate any proceedings by the Licensee. The
Licensee shall bear all costs but shall be entitled to retain for its own
absolute benefit any damages, costs or other expenses awarded or recovered in
any such proceedings.

9.4 Nothing in this Agreement shall confer on the Licensee any right or licence
to use any of the Licensor's (or any of its Affiliate's) trademarks, service
marks, logos or trade names other than the trade mark "X-Gel" which the Licensee
may use on the packaging of the Products and on marketing and other promotional
materials relating to the Products subject to the consent of the Licensor, not
to be unreasonably withheld or delayed.

9.5 If at any time during this Agreement the Licensee directly or indirectly
opposes or assists any third party to oppose the grant of letters patent on any
patent application within the Patents, or disputes or directly or indirectly
assists any third party to dispute the validity of any patent within the Patents
or any of the claims thereof, the secret or substantial nature of the Technical
Information of the Licensor, or whether the Patents are necessary within the
meaning of E.C. Regulation No 240/96, the Licensor shall be entitled at any time
thereafter to determine all or any of the licences granted hereunder forthwith
by notice thereof to the Licensee.

9.6 Where one party hereto has developed or acquired an Improvement to which
clause 4.1 above applies it shall not publish the same or do anything that might
prejudice the validity of any patent that might subsequently be granted on it
until the other party has had at least 15 working days from disclosure in
writing of all information relating to it to consider whether patent or other
protection should be applied for. The first party will on request notify the
other whether it intends to seek any relevant protection. If it does not wish to
do so and if the other party within the 15 working day period notifies the first
party that it would like to seek patent or other protection, and if it is agreed
between the parties that the other party may do so, then this obligation shall
continue for such time as may be reasonably required to prepare and file an
application for patent or other protection.

9.7 Either party to this Agreement may at any time in respect of an Improvement
elect not to pursue further an application for patent protection either jointly
or on its own behalf or to maintain any such patent protection as it may have
obtained and the party so electing shall notify the other party and shall if so
requested assign all rights it may have therein for nominal consideration to
that other party provided that the party electing not to pursue the application
or the resulting patent shall be entitled to a full non-exclusive royalty free
worldwide perpetual and irrevocable licence under all relevant rights with the
right to assign and to sub-license.

9.8 Subject to the foregoing each party shall be free to apply for patent
protection for any invention not made in whole or in part by an employee of the
other provided however that the specification in support thereof does not
disclose any Technical Information or other information which is confidential to
the other.

9.9 Subject to the provisions of clause 9.7 hereof the Licensor and the Licensee
shall share equally the costs of filing and prosecuting any future joint patent
applications to grant and of maintaining such granted patents in the Territory.
<PAGE>

10    Records and reports

10.1 The Licensee agrees to keep true and accurate records and books of account
containing its operations hereunder, which records and books of account shall
upon reasonable notice of the Licensor be open at all reasonable times during
business hours for inspection by the Licensor or its duly authorised agent.

10.2 The Licensor agrees to maintain confidential all financial information
received with respect to the Licensee's operations pursuant to clause 10.1.

11    Indemnification

11.1 The Licensee hereby indemnifies and holds the Licensor, its officers,
directors, employees and agents harmless from and against any and all judgement
decrees, losses, expenses, damages, claims, costs (including, without
limitation, attorney's fees and expenses and court costs), or any liabilities
whatsoever resulting from or arising out of or in connection with any one or
more of the Licensee's covenants, agreements, representations or warranties set
forth in this Agreement or related to the use of the Technical Information,
Patents, Copyright and Products other than in accordance with this Agreement.

11.2 The Licensor hereby indemnifies and holds the Licensee, its officers,
directors, employees and agents harmless from and against any and all judgement
decrees, losses, expenses, damages, claims, costs (including, without
limitation, attorney's fees and expenses and court costs), or any liabilities
whatsoever resulting from or arising out of or in connection with any one or
more of the Licensor's covenants, agreements, representations or warranties set
forth in this Agreement or related to the Licensee's use of the Technical
Information, Copyright, Patents and manufacture and sale of the Products in
accordance with the terms of this Agreement.

11.3 Notwithstanding any other provision of this Agreement neither party shall
be liable to the other for any Consequential Loss arising under this Agreement.
"Consequential Loss" means pure economic loss, loss of profit, loss of business
and like loss.

11.4 This Clause 11 shall survive termination of this Agreement.

12    Term and termination

12.1 Subject as hereinafter provided this Agreement shall commence on the
Effective Date and shall continue in force until expiry of the last to expire of
the Patents or, if longer, until the expiry of a period of ten (10) years from
the earliest date when the Products have been first put on the market in any
part of the European Union by the Licensee or any other licensee of the Licensor
provided that the Technical Information remains secret and substantial within
the meaning of E.C. Regulation 240/96 unless earlier terminated in accordance
with the following provisions of this clause.

12.2 If either party is in breach of any obligation on it hereunder and, in the
case of a breach capable of remedy, it shall not have been remedied by the
defaulting party within 45 days of written notice specifying the breach and
requiring its remedy, or if either party becomes insolvent, has a receiver
appointed over the whole or any part of its assets, enters into any compound
with creditors, or has an order made or resolution passed for it to

<PAGE>

be wound up (otherwise than in furtherance of a scheme for amalgamation or
reconstruction), or if the ownership or control of either party shall pass into
the hands of any legal person, which is a competitor of the other then the other
party may forthwith terminate this Agreement by notice without prejudice to the
accrued rights of either party. For the purposes of this clause 12.3 a person
shall be deemed to be a competitor of a party to this Agreement if he competes
commercially in any area of that party's business whether or not it is an area
relating to the types of product forming the subject of this Agreement.

12.4 Termination of this Agreement for any reason shall not bring to an end

      12.4.1 the confidentiality obligations on the parties hereto,

      12.4.2 the Licensee's obligations to pay licence fees or other sums, which
      have accrued, are due or which will become due in respect of sales under
      clause 12.5,

      12.4.3 the obligations (if any) on the Licensee under clause 12.6, or

      12.4.4 the licences (if any) under clauses 4.3, 4.5 and 9.7.

12.5 On termination of this Agreement for any reason the Licensee shall continue
to have the right for a period of six months from the date of termination to
complete deliveries of Products under contracts in force at that date and to
dispose of Products already manufactured.

12.6 On termination of this Agreement by the Licensor for any reason under
clause 12.3 above the Licensee shall offer to the Licensor at cost all stocks of
Products and promotional and other literature relating thereto in its possession
or control and shall provide the Licensor with all reasonable facilities to
inspect the same and shall deliver up to the Licensor all production manuals and
all other documents or materials whether human or machine readable and whether
stored electronically or otherwise (including copies thereof) in its possession
or control containing Technical Information remaining subject to the
confidentiality obligations of clause 8 hereof.

12.7 In the event of a breach by the Licensor which would entitle the Licensee
to terminate this Agreement the Licensee may, at its option, elect not to
terminate the Agreement and instead shall be entitled to suspend the payment of
any licence fees due under this Agreement from the date of the said election
until such time as the Licensor remedies the breach. Any dispute as to whether
the Licensee is entitled to exercise this option shall be referred at the
request of either party to the Expert.

13     Insurance

13.1 During the term of the Agreement, [CONFIDENTIALITY REQUESTED], the Licensor
shall maintain product liability insurance on the XGel Materials with minimum
limits of the sterling equivalent of $1,000,000 (ONE MILLION DOLLARS) per
occurrence and $10,000,000 (TEN MILLION DOLLARS) in the aggregate with an
insurance company in the United Kingdom and being a member of the British
Insurers Association. The Licensor shall provide the Licensee with a copy of the
certificate of such insurance and evidence of the payment of premiums therefor
promptly upon request.
<PAGE>

13.2 During the term of the Agreement, [CONFIDENTIALITY REQUESTED], the Licensee
shall maintain product liability insurance on the XGel Materials with minimum
limits of the sterling equivalent of $1,000,000 (ONE MILLION DOLLARS) per
occurrence and $10,000,000 (TEN MILLION DOLLARS) in the aggregate with an
insurance company in the United Kingdom and being a member of the British
Insurers Association. The Licensee shall provide the Licensor with a copy of the
certificate of such insurance and evidence of the payment of premiums therefor
promptly upon request.

14.   Force majeure

14.1 If either party to this Agreement is prevented or delayed in the
performance of any of its obligations under this Agreement by force majeure, and
if such party gives written notice thereof to the other party specifying the
matters constituting force majeure, together with such evidence as it reasonably
can give and specifying the period for which it is estimated that such
prevention or delay will continue then the party in question shall be excused
the performance or the punctual performance as the case may be as from the date
of such notice for so long as such cause of prevention or delay shall continue.

14.2 For the purpose of this Agreement 'force majeure' shall be deemed to be any
cause affecting the performance of this Agreement arising from or attributable
to acts, events, omissions or accidents beyond the reasonable control of the
party to perform and without prejudice to the generality thereof shall include
the following:

      14.2.1 strikes, lock-outs or other industrial action

      14.2.2 civil commotion, riot, invasion, war threat or preparation for
      war

      14.2.3 fire, explosion, storm, flood, earthquake, subsidence, epidemic or
      other natural physical disaster

      14.2.4 impossibility of the use of railways, shipping, aircraft, motor
      transport or other means of public or private transport

      14.2.5 political interference with the normal operations of any party.

15    General

15.1 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal successors but shall not otherwise be
assignable by either party without the prior written consent of the other, which
consent shall not be unreasonably withheld, except that the Licensor may assign
any of its rights and obligations to an Affiliate.

15.2 This Agreement constitutes the entire agreement and understanding of the
parties and supersedes all prior written or oral representations agreements or
understandings between them relating to the subject matter of this Agreement
other than any false misrepresentation made by a party to induce the other party
to enter into this Agreement.

15.3 No variation or amendment of this Agreement shall bind either party unless
made in writing and agreed to in writing by duly authorised officers of both
parties.
<PAGE>

15.4 If any provision of this Agreement is agreed by the parties to be illegal
void or unenforceable under any law that is applicable hereto or if any court or
other authority of competent jurisdiction in a final decision so determines this
Agreement shall continue in force save that such provision shall be deemed to be
excised herefrom with effect from the date of such agreement or decision or such
earlier date as the parties may agree.

15.5 The headings in this Agreement are for convenience only and are not
intended to have any legal effect.

15.6 A failure by either party hereto to exercise or enforce any rights
conferred upon it by this Agreement shall not be deemed to be a waiver of any
such rights or operate so as to bar the exercise or enforcement thereof at any
subsequent time or times.

15.7 Nothing in this Agreement shall create or be deemed to create a
partnership, franchise or joint venture or the relationship of employer and
employee or principal and agent between the parties.

15.8 The parties hereby agree that they do not intend that any third party,
which may benefit from this Agreement shall have any rights of enforcement under
the terms of the Contract (Rights of Third Parties) Act 1999.

16    Notices

16.1 Any notice required to be given hereunder by either party to the other
shall be in writing and may be given by hand or sent by first class prepaid post
or facsimile transmission and shall be deemed to be duly served. and shall be
served by sending the same by registered or recorded delivery post to the
address of the other party as given herein or to such other address as that
party may have previously notified to the party giving notice as its address for
such service:

      16.1.1 if delivered by hand, when left at the proper address for
      service;

      16.1.2 is given or made by prepaid first class post, 48 hours after being
      posted (excluding Saturdays, Sundays and public holidays);

      16.1.3 if given or made by facsimile transmission at the time of
      transmission, provided that a confirming copy is sent by first class
      prepaid post to the other party within 24 hours after transmission
      provided that, where in the case of delivery by hand or transmission by
      facsimile, such delivery or transmission occurs either after 4.00 pm on a
      Business Day, or on a day other than a Business Day, service shall be
      deemed to occur at 9.00 am on the next following Business Day (such times
      being local time at the address of the recipient).

16.2 Any demand, notice or communication shall be made in writing or by
facsimile addressed to the recipient at its registered office or its address
stated in this Agreement (or such other address or facsimile number as may be
notified in writing from time to time) and shall be marked for the attention of
the Chief Executive Officer in the case of the Licensee and the Chief Financial
Officer in the case of the Licensor.

16.3 For the purposes of this clause 16 "Business Day" means any day other than
Saturdays, Sundays and public or statutory holidays.
<PAGE>

17.   Expert Determination

17.1 Where under any provision of this Agreement any matter is to be determined
by an Expert, the matter shall be referred at the instance of either party to
such person as may be appointed by agreement between the parties or, in default
of agreement, nominated on the application of either party by the President for
the time being of the Proprietary Association of Great Britain.

17.2 Any person to whom a reference is made under clause 17.1 shall act as an
expert and not as an arbitrator and shall be entitled to appoint such technical
expert or experts as he considers necessary to assist him in determining the
matter referred to him. The decision of the Expert (which shall be given by him
in writing stating his reasons therefor) shall be final and binding on the
parties.

17.3 Each party shall provide any Expert with such information as he may
reasonably require for the purposes of his determination; if either party claims
any such information to be confidential to it then, provided that in the opinion
of the Expert that party has properly claimed the same as confidential, the
Expert shall not disclose the same to the other party or to any third party.

17.4 The costs of any Expert (including the costs of any technical expert
appointed by him) shall be borne in such proportions as the Expert may determine
to be fair and reasonable in all the circumstances or, if no such determination
is made by the Expert, by the parties in equal proportions.

18    Governing law and disputes

18.1 The construction validity and performance of this Agreement shall be
governed in all respects by English Law.

18.2 All disputes arising in any way out of or affecting this Agreement shall be
subject to the exclusive jurisdiction of the English courts to which the parties
hereto agree to submit.

SCHEDULE 1

The Patent applications referred to in clause 1(n)(i)

[CONFIDENTIALITY REQUESTED]

SCHEDULE 2

Formal Patent Licence for Registration (Clause 3.5)


Date:                                                       2001

Parties:

1  'The Licensor': [________] of [________].

2  'The Licensee': [________] of [________].
<PAGE>

Recitals:

(A) The Licensor is the registered proprietor of United Kingdom Patent No
[________] for an invention entitled [________] (the 'Patent').

(B) By an Agreement dated the [________] day of [________] 20[__] (the
'Agreement') it was agreed between the parties thereto for the consideration
therein mentioned that the Licensor would grant to the Licensee [an exclusive]
[a non-exclusive] licence under the said Patent as herein set forth.

(C) Accordingly, the parties have now agreed to execute this Licence.

Operative provisions:

1. Pursuant to the said Agreement the Licensor HEREBY GRANTS (and shall from the
date of the publication of the application for the Patent be deemed to have
granted) to the Licensee [exclusive] [a non-exclusive] authority and licence to
manufacture use exercise and sell the said invention and to do all other things
within the scope of protection of the Patent on the terms and conditions of the
Agreement whilst the Patent shall remain in force unless this Licence shall be
terminated prior thereto under provisions of the Agreement or unless the
Agreement shall itself be terminated whereupon this Licence shall ipso facto
terminate.

2. This Licence is granted in pursuance of the said Agreement and not in
substitution therefor whereby nothing herein contained shall in any way derogate
from the said Agreement, which shall remain in full force and effect.

IN WITNESS etc

SCHEDULE 3

Licence fees (Clause 5)

Unless otherwise agreed in writing the following are the annual fees payable by
the Licensee to the Licensor in $US in respect of each Machine purchased by the
Licensee:

[CONFIDENTIALITY REQUESTED]

SCHEDULE 4

Confidential Items

[CONFIDENTIALITY REQUESTED]

SCHEDULE 5

To be typed on Rustons & Lloyd's Headed Notepaper

To:   Bioprogress Technology International Inc
      Unit 1, Norwood Road, March, Cambridgeshire PE15 8QD
<PAGE>

And to: Farmasierra, S. A., Carretera de Irun, Km 26,200 28700 San
        Sebatian de los Reyes, Madrid, Spain


Dear Sirs

We refer to the Patent Licence Agreement entered into between BioProgress
Technology International Inc and Farmasierra S.A of even date herewith a copy of
which is attached, ("the Patent Licence"). Words and expressions in this letter
shall have the same meanings as in the Patent Licence.

Under the terms of the Patent Licence the Licensor has agreed to deposit a copy
of the XGel Technical Information and any modifications, enhancements, revisions
and updates thereto from time to time with us at our offices at 136 High Street,
Newmarket.

We hereby irrevocably undertake to the Licensee and the Licensor:

1 to place the XGel Technical Information submitted to us from time to time in
our strong room and keep it there until released according to paragraph 4 below;

2 upon receipt of the XGel Technical Information from time to time to send
written confirmation of receipt and storage respectively to the Licensor and the
Licensee;

3 to notify the Licensee and Licensor of any change in the location of
storage of the XGel Technical Information; and

4 to release the XGel Technical Information to the Licensee in accordance with
clauses 3.13 to 3.18 of the Patent Licence.

Yours faithfully

.....................................
Rustons & Lloyd Solicitors

SIGNED


Barry J. Muncaster, CEO
.......................................................................
on behalf of BioProgress Technology International Inc


Tomas Olleros
.......................................................................
on behalf of Farmasierra S.A.