EXHIBIT 10.38

DATED: January 30, 2001

                                  E J Lord Ltd

                                       To

                               BioProgress Limited

                                      with

                                 BioProgress Inc

                                      Lease
                                       of
                          Unit 1 Hostmoor Estate March


                                    Dawbarns
                                   Solicitors
                                  1/2 York Row
                                     Wisbech
                                      Cambs
                                    PE13 1EA
<PAGE>

INDEX

PARTICULARS

DEFINITIONS

INTERPRETATION

DEMISE

INSURANCE

TENANT'S OBLIGATIONS
          Rents and other payments
          Repair and decoration
          Alterations and additions
          User
          Alienation
          Entry
          Planning Acts
          New Guarantor
          Superior interest
          Material development
          Indemnity

COVENANTS BY THE LANDLORD
          Quiet enjoyment
          Superior Lease rents

PROVISOS
          Re-entry
          Adjoining land
          No liability in damages
          Failure to perform obligations
          Statutory compensation
          Exclusion of rights not granted
          Tenant's acknowledgement

COVENANTS BY AND PROVISIONS RELATING TO THE SURETY

THE FIRST SCHEDULE
          Rights and easements granted
THE SECOND SCHEDULE
          Rights and easements excepted
THE THIRD SCHEDULE
          Provisions for Rent review
THE FOURTH SCHEDULE
          Covenants by the Surety
THE FIFTH SCHEDULE
          Memoranda of Rent Reviews
THE SIXTH SCHEDULE
          Authorised Guarantee Agreement
<PAGE>

PARTICULARS

1 DATE OF THIS DEED:       January 30, 2001

2 LANDLORD:                E J Lord Limited, whose registered office is at 44
                           Wimblington Road, March, Cambridgeshire (CRN3998705)

3 TENANT:                  BioProgress Technology Limited, whose registered
                           office is at Unit 1 Norwood Road, March,
                           Cambridgeshire (CRN3289265)

4 SURETY:                  BioProgress Technology International Inc of 9055
                           Huntcliff Trace, Atlanta, Georgia, a company
                           incorporated in the USA and governed by law of the
                           State of Nevada, USA

5 ADVANCED PAYMENT:        (pound)100.00 per quarter

6 ALTERNATIVE USE:
  CLASS                    Classes A1 A2 B1 B2 and B8 of the 1987 Order or such
                           uses which are equivalent to those specified (as at
                           the Date hereof) in the said Order in the event of
                           re-enactment repeal or otherwise

7 COMMENCEMENT DATE:       June 1, 2001

8 DEMISED PREMISES:        That part of the Estate comprising the building known
                           as Unit 1 with associated car parking service yard
                           and landscaped areas as shown edged red on Plan 1
                           including Conduits within the Demised Premises and
                           which serve it exclusively

9 ESTATE:                  The Landlord's Estate at Hostmoor Avenue, March
                           Cambridgeshire edged blue on Plan 1

11 EXPIRY DATE OF TERM:    June 1, 2026

12 LANDLORD'S:             The period from the  day of
   FINANCIAL YEAR:         in one year to the                day of
                           in the Following year or such other period as the
                           Landlord May in its absolute discretion determine.

13 SERVICE AREA:           The land coloured green on Plan 1 or such other
                           place or places on the Estate as the Landlord may
                           from time to time at its discretion designate

14 ACCESS WAY:             The land coloured brown on Plan 1
<PAGE>

15 INITIAL RENT:           One hundred and twenty three thousand pounds per
                           annum exclusive together with VAT at the rate
                           current at the relevant tax point (if applicable)
                           subject to review under the Third Schedule

16 RENT COMMENCEMENT:
   DATE                    June 1, 2001

17 RENT REVIEW DATES:      June 1, 2006, 2011,  2016, 2021, 2026

18 RENT REVIEW INTERVALS:  Five Yearly

19: TERM:                  Twenty-five years (25)

20: USER:                  The research and development of plastic products and
                           for the sale of all goods associated therewith or
                           ancillary thereto

21: PLANT AREA:            The part of the demised Premises hatched green on
                           Plan 1
<PAGE>

THIS LEASE made on the date stated in the Particulars

BETWEEN

      1)    the Landlord
      2)    the Tenant
      3)    the Surety

WITNESSES:

1. DEFINITIONS

In this lease the following expressions (where the context so admits) shall have
the following meanings:

"Act"                        Every Act of Parliament or EEC Regulation (whether
                             specifically named herein or not) which may be
                             relevant to the Demised Premises its user or
                             anything on the Demised  Premises or to the
                             persons employed or having recourse thereto whether
                             or not in force at the date hereof and shall
                             include any statutory re-enactment or modification
                             thereof and any order regulation directive bye law
                             rule consent licence or code of practice granted
                             required or issued thereunder or by any public or
                             local authority or by any court or body of
                             competent jurisdiction.

"Common Parts"               Those parts of the Estate which are provided by the
                             Landlord for common use and enjoyment by the Tenant
                             and occupiers of the Estate and all persons
                             expressly or by implication authorised by them
                             including the Access Way and Service Yard serving
                             the Demised Premises

"Conduit"                    Any conducting medium or other thing by means of
                             which any facility service or matter may pass.

"Demised Premises"           The whole and every part of the land described in
                             the particulars

"Environmental Acts"         The Public Health Act 1936 The Clean Air Act 1956
                             The Control of Pollution Act 1974 TheWater Act
                             1989 and The Environmental Protection Act 1990

"Estate"                     The Landlord's estate referred to in-the
                             Particulars and of which the Demised Premises forms
                             part

"Insolvency Act"             The Insolvency Act 1986 (subject to the definition
                             of `Act' herein contained)
<PAGE>

"Insured Risks"              The risks insured against under Clause 4.1

"Interest"                   Interest at the rate of 5% above Lloyd's TSB Bank
                             Plc Base Rate for the time being payable from the
                             date of demand by the Landlord (or if earlier the
                             date at which moneys shall have become due or at
                             which the Landlord shall have  expended moneys in
                             respect of which interest is required appropriate)
                             under this lease) until the date of payment to the
                             Landlord compounded with quarterly rests on the
                             usual quarter days PROVIDED that if such base rate
                             shall cease
                             to exist the rate shall be such as the Landlord
                             shall reasonably determine as being that most
                             comparable therewith

"Landlord"                   Shall include the person entitled for the time
                             being to the reversion to this Lease

"Landlord's Fixtures"        The Landlord's fixtures and fittings (if any)
                             specified in the seventh Schedule

"Management Services"        The cost of cleaning lighting repairing
                             maintaining rebuilding and renewing the Common
                             Parts and all walls fences gutters drains pipes
                             sewers roadways parking areas circulation areas
                             pavements and entrance ways and of planting
                             replanting and generally maintaining any
                             landscaped areas and any other easements things or
                             conveniences which shall at any time during the
                             Term belong to or be capable of being used or
                             enjoyed by the Demised Premises or the Tenant or
                             occupier thereof or any part thereof in common or
                             jointly with any other person or persons and any
                             other act or thing done in or about or in
                             connection with the Estate reasonably calculated
                             to be for the benefit of the Tenant (either alone
                             or in conjunction with other tenants of the
                             Landlord) but not otherwise provided for herein

"Outgoings"                  All existing and future rates taxes duties charges
                             assessments impositions and outgoings but excluding
                             any tax imposed on the Landlord in respect of
                             receipt of rent or other payment made by the Tenant
                             under this Lease or any disposition or dealing with
                             the ownership of the reversion of this Lease

"Particulars"                The details on the preceding pages headed
                             "Particulars"

"Plan 1"                     Plan 1 annexed hereto
<PAGE>

"Planning Acts"              The Town and Country Planning Act 1990 the
                             Planning (Listed Buildings and Conservation Areas)
                             Act 1990 the Planning (Hazardous Substances) Act
                             1990 the Planning (Consequential Provisions) Act
                             1990 and the Planning and Compensation Act 1991

"Regulations"                Such reasonable regulations as the Landlord may
                             make in accordance with good estate management from
                             time to time in connection with the management of
                             the Common Parts or any services thereon or therein
                             of which the tenant has been given a copy

"Requisite Notice"           A notice in writing to the Tenant seventy-two
                             hours before any entry is made on the Demised
                             premises PROVIDED THAT in the case of an emergency
                             no notice shall be required

"Service Charge"             The reasonable and proper costs expenses
                             and outgoings reasonably and properly incurred by
                             the Landlord in providing the Management Services

"Surety"                     Shall include if he is an individual his personal
                             representatives

"Tenant"                     Shall include the Tenant's successors in title and
                             if he is an individual his personal representatives

"Term"                       The term mentioned in the Particulars which shall
                             include any extension or continuation whether by
                             statute or at common law

"Termination Date"           The date of expiration or sooner determination of
                             the Term

"VAT"                        Value Added Tax or any tax amending or replacing it

"1987 Order"                 The Town & Country Planning (Use Classes)
                             order 1987 and (but only if the Landlord shall so
                             elect in writing) any amendment

"The Permitted Part"         Such part of these demised premises as shall be
                             designated as such by the Tenant subject to the
                             prior written approval of the Landlord (such
                             approval not to be unreasonably withheld or
                             delayed) provided that the landlord shall not be
                             required to approve more than one permitted part.

2. INTERPRETATION

In this Lease:
<PAGE>

2.1   The Particulars shall be included in and form part of this lease.

2.2   I there is more than one person as the Tenant or the Surety the singular
      shall include the plural and the covenants by such persons shall be joint
      and several

2.3   Where any act is prohibited the Tenant shall not allow or suffer such
      act to be done

2.4   Where the Landlord or any other person exercises any rights to enter the
      Demised Premises under this lease unless specifically provided herein to
      the contrary the person exercising such right will make good any damage
      caused with all due diligence and speed to the Demised Premises but
      neither such person nor the Landlord shall be liable for any compensation.

2:5   If this Lease shall at any time be an underlease any provision in this
      Lease

      2:5:1 Requiring the Tenant to obtain the consent or approval of the
            Landlord shall be deemed to include a requirement for the Tenant
            also to obtain the consent or approval of all superior landlords on
            the same basis as required under this Lease and the reasonable and
            proper costs and expenses of obtaining such consent (whether or not
            consent is granted) shall be a debt due by the Tenant to the
            Landlord and shall be repaid on demand with Interest

      2:5:2 Entitling the Landlord to enter on the Demised Premises shall be
            Deemed to authorise all superior Landlords so to enter

      2:5:3 Authorising the Landlord (and by virtue of the preceding sub-clause
            any superior landlord) to enter the Demised Premises shall extend to
            those authorised by it or them

      2:5:4 Requiring the Landlords consent which cannot be unreasonably
            withheld or delayed the Superior Landlord shall not unreasonably
            withhold its consent

                  2:6   Reference to any Act includes any Act amending
                        modifying re-enacting or replacing it

3.    Demise

      The Landlord DEMISES to the Tenant ALL THOSE the Demised Premises TOGETHER
      with the Landlord's Fixtures AND TOGETHER with the easements and rights
      specified in the First Schedule EXCEPTING AND RESERVING to the Landlord
      the rights and easements specified in the second Schedule TO HOLD the
      Demised Premises to the Tenant from and including the Commencement Date
      for the Term SUBJECT to those matters contained or referred to in a
      conveyance dated 28th September 1988 between Carter Commercial
      Developments (London) Limited (1) and Hostmoor Limited (2) and Ernest John
      Lord (3) YIELDING AND PAYING
<PAGE>

3.1   Yearly and Proportionately for any fraction of a year from and from and
      including the Rent Commencement Date the insurance rent as determined
      pursuant to Clause 4.2 hereof and the Service Charge Rent

3.2   Interest Value Added Tax and all other sums whatsoever as shall become
      payable by the Tenant to the Landlord under the provisions of this Lease
      which are all hereby reserved as rent

4.    Insurance

The Landlord covenants with the Tenant to:

4.1   insure the Demised Premises subject to such usual and reasonable excesses
      exclusions or limitations as the Landlord or its Insurers may require in
      such reputable insurance office or with such underwriters and through such
      agency as the Landlord may from time to time decide in such sum as the
      Landlord may reasonably estimate as the full reinstatement value of the
      Demised Premises or such higher value as the Tenant may reasonably require
      including demolition site clearance and shoring up Architects and
      surveyors and other professional fees and incidental expenses and value
      added tax on such items against such of the following and such other risks
      as the Landlord may from time to time deem necessary or appropriate in so
      far as the same are obtainable on normal commercial terms

      4.1.1 Loss or damage by fire explosion storm tempest (including Lightning)
            flood burst or overflowing pipes and tanks sprinkler damage
            subsidence leave earthquake impact from vehicles aircraft (other
            than hostile aircraft) and other aerial devices and articles dropped
            therefrom riot civil commotion and malicious damage

      4.1.2 Public and property owner's liability of the Landlord

      4.1.3 Loss of rent payable under this Lease from time to time (having
            regard to any review of rent which may become due under this Lease)
            for three years or such longer period as the Landlord may from time
            to time reasonably consider to be sufficient for the purposes of
            planning and carrying out any such reinstatment

      4.2.1 At the reasonable request of the Tenant the Landlord will produce
            evidence of such insurance and of the payment of the last premium

      4.2.2 To notify the Tenant of any change in the risks covered under the
            policy within 28 days of the Landlord becoming so aware

      4.2.3 To use reasonable endeavours to procure that the interest of the
            Tenant is noted or endorsed on the Policy

4.3   If any part of the Demised Premises or the access to it is damaged by any
      of the Insured risks which the Landlord has covenanted in the Lease to
      insure or by any additional risk against which the Landlord has insured
      and the Demised Premises or any part of it is unfit for use and if the
      policy or policies of insurance shall not

<PAGE>

      have been vitiated or payment refused in whole or in part as a result of
      some act or default of the Tenant or anyone under its control or on the
      Demised Premises at its invitation or with its consent then a fair
      proportion in accordance with the nature and extent of the damage of the
      Rent and Service Charge shall be suspended until the Demised Premises
      shall be fit use and any dispute regarding in default of agreement upon
      the application of either party by the President for the time being of the
      Royal Institution of Chartered Surveyors under the Arbitration Acts 1950
      and 1979

4.4   If the Demised Premises are damaged by any of the Insured Risks which the
      Landlord has covenanted in the Lease to insure or by any additional risk
      against which the Landlord has insured then subject to paragraph 4.5 below
      and subject to the Landlord being able to obtain all necessary consents
      the Landlord will lay out the net proceeds of such insurance in
      reinstating the insured premises and the Tenant will pay to the Landlord
      on demand the amount equivalent to any excess which may be applicable to
      such insurance in respect of the Demised Premises and any shortfall shall
      be made up by the Landlord

4.5.1 Whenever the Building is destroyed or damaged by any risk against which
      the Landlord has covenanted in this Lease to insure or by any additional
      risk against which the Landlord has insured and the Demised Premises or
      the Building or any part of it is still unfit for occupation and use three
      years after the date upon which it first became unfit either party may for
      so long as the Demised Premises or the Building or part remains unfit
      serve on the other a notice referring to this clause where upon this Lease
      will immediately come to an end

4.5.2 Termination under the preceding clause will not affect any rights that
      either party may have against the other

4.6   The Landlord shall not be obliged to comply with the obligations under
      Clause 4.4 hereof if payment of the insurance moneys has been refused in
      whole or in part by reason of any act or default of the Tenant or anyone
      under its control or on the Demised Premises at its invitation or with its
      consent and the Tenant has not complied with Clause 4.7.2 hereof

4.7   The Tenant hereby covenants with the Landlord

      4.7.1 To pay the Landlord within 14 days of demand the amount of the
            premium for insuring the Demised Premises against the Insured Risks
            from the commencement Date as conclusively determined by the
            Landlord

      4.7.2 If the payment of any insurance moneys is refused due to an act or
            default of the Tenant to pay to the Landlord on demand the amount so
            refused and also to pay to the Landlord on demand the amount of any
            excess as mentioned in Clause 4.4

      4.7.3 Not to do anything which may prejudice any policy of insurance for
            the time being in force in respect of any part of the Demised
            Premises or the Building or any nearby premises or which may result
            in such insurance becoming void or voidable or the rate of premium
            under such insurances

<PAGE>

            being increased and at all times to comply with all requirements of
            the insurers of the Demised Premises

      4.7.4 To keep the Demised Premises supplied with such fire fighting
            equipment as the insurers of the Demised Premises may reasonably
            require and the competent Fire Authority may require or as the
            Landlord may reasonably require and to maintain such equipment to
            the satisfaction of all such persons

      4.7.5 Not to store inflammable or explosive substances or goods at the
            Demised Premises and in respect of which the Insurers have been
            notified and given their written consent nor to obstruct the access
            to any fire equipment or the means of escape from or over the
            Demised Premises and in the event of anything happening which might
            affect any insurance policy relating to the Demised Premises
            forthwith to give notice to the Landlord

      4.7.6 To insure in the joint names of the Landlord and Tenant all plate
            glass in the Demised Premises against breakage or damage in its full
            reinstatement value for the time being with an insurance office or
            underwriters approved in writing by the Landlord such approval not
            to be unreasonably withheld or delayed and to produce to the
            Landlord on reasonably demand evidence of such insurance and the
            payment of the current year's premium and to lay out all monies
            received from such insurance forthwith in reinstating the plate
            glass and to make up any deficiency from the Tenant's own moneys and
            subject hereto not to effect any insurance over the Demised Premises
            in respect of any of the Insured Risks

      4.7.7 To reimburse to the Landlord on demand the reasonable and proper
            cost of valuations for insurance purposes which the Landlord shall
            cause to be made from time to time but not more frequently than once
            in every three years

5.    Tenant's Obligations

The Tenant further COVENANTS with the Landlord:

5.1   Rents and other payments

      5.1.1 To pay the rents reserved by this Lease without deduction or set off
            in accordance with its terms and in the event that any rent shall be
            unpaid for more than fourteen days after the due date (whether
            formally demanded or not) then in addition to pay Interest thereon
            from such due date until actual payment

      5.1.2 To pay every other sum due under this Lease on the due date and in
            default to pay Interest thereon in addition from such due date until
            actual payment

5.2   Repair and decoration
<PAGE>

      5.2.1 At all times to repair and to keep the Demised Premises and the
            Landlords's fixtures in good and substantial repair and condition
            free from all defects whether or not inherent in the Demised
            Premises and to yield up the same at the Termination Date in
            accordance with the covenants by the Tenant contained in this Lease
            (damage by any of the Insured Risks which the Landlord has
            covenanted in this Lease to insure or by any additional risk against
            which the Landlord has insured excepted unless payment of the
            insurance moneys shall be withheld in whole or in part by reason
            solely or in part of any act or omission of the Tenant or anyone
            under its control or any person on the Demised Premises at its
            invitation or with its consent) and if the Tenant shall fail fully
            to comply with the provisions of this Clause to pay to the Landlord
            (notwithstanding the termination of this Lease) immediately prior to
            the termination of this Lease for the period reasonably required by
            the Landlord

            5.2.1.1 To prepare a schedule of dilapidations provided that the
                    Landlord shall have used all reasonable endeavours to do
                    so and to supply the Tenant with a copy of the same at
                    least three months prior to the termination of the Lease

            5.2.1.2 To prepare a detailed specification of the work required

            5.2.1.3 To obtain quotations for such work and

            5.2.1.4 To carry out such works

      5.2.2 To keep the Demised Premises and all Conduits within the Demised
            Premises which exclusively serve the Demised Premises in a clean and
            tidy condition and properly cleansed and free from obstruction and
            in particular to clean all the inside of the windows and all other
            inside glass in the Demised Premises monthly

      5.2.3 Without prejudice to the generality of the foregoing during the
            fifth year in respect of the interior of the Demised Premises and
            during the third and every succeeding third year in respect of the
            exterior and in either case in the last six months of the Term to
            paint with a printing coat and two coats of good quality paint or
            otherwise treat as the case may be all the wood and metalwork of the
            Demised Premises usually painted or otherwise treated provided that
            the Tenant shall not be required to decorate more than once in any
            eighteen month period in a workmanlike manner to the reasonable
            satisfaction of the Landlord and to paint or paper in a workmanlike
            manner all walls and ceilings of the Demised Premises usually
            painted or papered as the case may be such colours patterns and
            materials as the Landlord may require and in every case materials of
            the good quality only shall be used and also during the last three
            months thoroughly to clean all other parts of the Demised Premises
            and to repair or replace any of the Landlord's Fixtures which need
            renewal or replacement
<PAGE>

      5.2.4 To repair or replace forthwith by new articles of similar kind and
            quality any fixtures fittings or plant or equipment (other than
            tenants or trade fixtures and fittings) in the Demised Premises
            which shall become in need of replacement

      5.2.5 To keep any part of the Demised Premises which may not be built upon
            adequately surfaced in good condition free from weeds and the
            Planted Area properly cultivated

      5.2.6 At the reasonable request of the Landlord by at the cost of the
            Tenant to enter into such contracts with such persons as the
            Landlord may approve for the maintenance and repair of the Demised
            Premises and/or the plant and machinery contained therein

5.3   Alterations and additions

      5.3.1 That no new building or new structure of any kind shall at any time
            be erected upon any part of the Demised Premises

      5.3.2 Not to make any internal or external alterations or additions to any
            part of the Demised Premises and not to cut maim or removed any
            structural parts of the Demised Premises and not to make any change
            in the existing design or appearance of the Demised Premises
            PROVIDED ALWAYS that the Tenant may with the prior written consent
            of the Landlord (such consent not to be unreasonably withheld or
            delayed) carry out internal non-structural alterations to any
            buildings for the time being erected on the Demised Premises
            Provided That the Landlord shall have the right to require that such
            alterations either remain or are removed at the determination of the
            Term

5.4   User

      5.4.1 At all times during the Term to use the Demised Premises in
            accordance with the provisions for User specified in the Particulars
            and not to use the same or any part for any other purpose and not to
            permit the Demised Premises to remain vacant for more than eight
            week in any period of twelve months except in so far as:

            5.4.1.1 the Tenant may be prevented from doing so by reason of
                    destruction or damage to the Demised Premises by an
                    Insured Risk

            5.4.1.2 May be necessary for the carrying out with all
                    reasonable speed of any substantial repairs alterations
                    or additions to the Demised Premises

            5.4.1.3 To do so would be in breach of any other provision of
                    this Lease

            5.4.1.4 There are circumstances outside the reasonable control
                    of the Tenant
<PAGE>

      PROVIDED THAT with the prior written consent of the Landlord (such consent
      not to be unreasonably withheld or delayed) the Demised Premises may be
      used for a use falling within the Alternative Use Class

      5.4.2   Not to use any part of the Demised  Premises for any noxious noisy
              or offensive  trade or business nor for any illegal or immoral act
              or  purpose  nor for any sale by  auction  and not to  commit  any
              nuisance or do anything which may be or become an inconvenience or
              cause damage or disturbance to the Landlord or any other person

      5.4.4   Not to allow empty  containers  or rubbish of any  description  to
              accumulate  upon the  Demised  Premises  elsewhere  on the  Estate
              (unless  properly  stacked  or  placed  within  any  refuse  store
              provided for that  purpose) nor to discharge  into any Conduit any
              deleterious  matter or any substance  which might pollute or be or
              become a source of danger or injury to the drainage  system of the
              Demises Premises of any other property or person

      5.4.5   Not to use any part of the  Demised  Premises in such manner as to
              subject it to any strain or  interference  which is not reasonable
              or is in excess of that which the Demised  Premises  were designed
              to bear and not to install machinery on the Demised Premises which
              shall be unduly noisy or cause undue vibration

      5.4.6   Not to do anything on the Demised  Premises which might reasonably
              be expected to produce  directly or indirectly  corrosive fumes or
              vapours  or  moisture  or  humidity  in excess  of that  which the
              Demised   Premises   were  designed  to  bear  and  are  otherwise
              reasonable

      5.4.7   Not  to  erect  or  display  any  mast  or  pole  flag   signboard
              advertisement  inscription  bill placard or sign whatsoever on the
              Demised  Premises or the windows thereof so as to be seen from the
              exterior  without the  previous  written  consent of the  Landlord
              which  shall not be  unreasonably  withheld  in  respect of a sign
              stating the Tenant's name and business or profession (such sign if
              the  Landlord  so  requires  to be removed  and any damage  caused
              thereby made good by the Tenant at the Termination Date)

      5.4.8.1 To comply with the  Regulations  made by the Landlord from time to
              time

      5.4.8.2 To notify the Landlord and the appropriate Local Police Officer of
              the name and  address and  telephone  number of two key holders of
              the Demised Premises

      5.4.9   Not to load or unload any vehicle  outside  the  Demised  Premises
              unless the vehicle  shall be in an area provided from time to time
              for that  purpose  and not to  obstruct  or damage any part of the
              Service Yard

      5.4.10  To give  written  notice  to the  Landlord  of any  defect  in the
              Demised  Premises,  which might give rise to an  obligation on the
              Landlord to do or refrain from doing any act or thing. In order to
              comply with the duty of care imposed on the  Landlord  pursuant to
              the Defective Premises Act

<PAGE>

              1972 and at all times to display and  maintain  all notices  which
              the  Landlord  may  from  time to time  reasonably  require  to be
              displayed at the Demised Premises

      5.4.11  Not to stop up or paint out any  windows at the  Demised  Premises
              and not to permit any  encroachment  upon the Demised  Premises or
              the  acquisition  of any new right to light  passage  drainage  or
              other  easement over any part of the Demised  Premises and to give
              as soon as reasonably  practicable  written notice to the Landlord
              of  any  threat  such  encroachment  or  acquisition  and  at  the
              Landlord's  written  request and at the cost of the Tenant to take
              such action as the Landlord may reasonably require to prevent such
              encroachment or acquisition

      5.4.12  To put and  keep  the  Planted  Area as a  landscaped  area and to
              maintain the same in an  attractive  and proper  manner and not to
              cut lop fell  maim or injure  any  trees or  shrubs or bushes  now
              growing or to be planted  thereon or any other part of the Demised
              Premises without the prior written consent of the Landlord

      5.4.13  Not to use  the  Service  Are  other  than  for  the  loading  and
              unloading of goods

5.5   Alienation

      5.5.1   Not to assign charge underlet or part with or share  Possession or
              occupation of the whole or any part of the Demised Premises except
              as provided in this subclause

      5.5.2   Not to assign the whole of the Demised Premises without:

              5.5.2.1   Procuring  that any intended  assignee (the Assignee) of
                        the Demised  Premises enters into direct  covenants with
                        the Landlord to pay the rents reserved by this Lease and
                        observe and perform all the  Tenant's  covenants in this
                        Lease from the date of the assignment or transfer of the
                        Tenant's  interest  hereunder  to the  Assignee  for the
                        residue  of the Term or until such  interest  is further
                        assigned  (other than by an excluded  assignment  within
                        the  meaning of Section  11 of the  Landlord  and Tenant
                        (Covenants) Act 1995 whichever is the shorter period

              5.5.2.2   Obtaining the consent of the Landlord  (such consent not
                        to be unreasonably withheld or delayed)

              5.5.2.3   first  entering into an Authorised  Guarantee  Agreement
                        within the  meaning of  Section 16 of the  Landlord  and
                        Tenant (Covenants) Act 1995 in substantially the form of
                        the draft set out in the Eighth Schedule
<PAGE>

      5.5.3 The Landlord may refuse the consent referred to at 5.5.2.2 above
            where there is at the time of the Tenant's request for such consent
            any outstanding rent due hereunder

      5.5.4 If it is reasonable to do so the Landlord shall be entitled to
            require as a condition precedent to the grant of the consent
            referred to at 5.5.2.2 above the provision of a deed of Covenant
            duly executed by one or two guarantors reasonably acceptable to the
            Landlord by which he or they enter into covenants with the Landlord
            in the form of the covenants set out in the Fourth Schedule

      5.5.5 The power of the Landlord to decide upon any of the matters
            requiring its decision under sub-clause 5.5.4 shall be exercised
            reasonably

      5.5.6 Not to underlet the whole or the permitted part of the Demised
            Premises without obtaining the consent of the Landlord (such consent
            not to be unreasonably withheld or delayed) nor otherwise than by an
            instrument in writing approved by the Landlord (such approval not to
            be unreasonably withheld or delayed) on the same terms and
            conditions as this Lease so far as applicable to the premises
            underlet, and:

            5.5.6.1 containing an absolute prohibition against the
                    underlessee underletting charging parting with
                    possession or sharing the occupation of the premises
                    underlet or any part of them or assigning part of them

            5.5.6.2 containing a covenant by the underlessee not to assign
                    the premises underlet without the prior written consent
                    of the Landlord under this Lease (such consent not to be
                    unreasonably withheld or delayed)

            5.5.6.3 at a rent equal to the then market rent of the Demised
                    Premises without taking any fine or premium

            5.5.6.4 containing provisions for the rent reserved by the
                    underlease to be reviewed in an upward direction only
                    with effect from the same dates on which the rent hereby
                    reserved is to be reviewed

            5.5.6.5 containing provisionsfor the re-instatement of the
                    Demised Premises to a single unit in the case of a
                    sublease of a Permitted Part

            5.5.6.6 containing or having endorsed upon it an agreement excluding
                    sections  24 to 28 of  the  Landlord  and  Tenant  Act  1954
                    authorised  by an order of the court under  section 38(4) of
                    that Act nor without procuring that any intended underlessee
                    enters into direct  covenants  with the Landlord  under this
                    Lease to observe and perform the Tenant's  covenants in this
                    Lease so far as applicable to the premises  underlet and the
                    covenants  to be contained  in the  proposed  underlease  by
                    virtue of the provisions of this paragraph 5.5



<PAGE>


      5.5.7 Not to waive or vary the covenants on the part of any underlessee
            and the provisions for review of rent contained in any underlease

      5.5.8 Notwithstanding the other provisions of this clause 5.5 The tenant
            may share the occupation of the whole or any part of the Premises
            with a company which is a member of the same group as the Tenant
            (within the meaning of section 42 of the Landlord and Tenant Act
            1954) or a member of or associated to the Cooperative Society for so
            long as both companies shall remain members of the same group or a
            member of or associated to the Cooperative Society and otherwise
            than in a manner that creates or transfers a legal estate

      5.5.9 Within one month after every assignment or sub-letting of the
            Demised Premises and any devolution of this Lease to give notice
            with full particulars to the Landlord or to his solicitors and to
            pay on each occasion Such reasonable registration fee as the
            Landlord or his solicitors shall specify and at the same time as the
            notice shall be given to produce for inspection any assignment or
            counterpart of the sub-lease

      5.5.7 To produce on demand such evidence as the Landlord may require to
            satisfy itself that the Tenants covenants in the Lease have been
            complied with

5.6   Entry

      5.6.1 To permit the Landlord at all reasonable times upon Requisite Notice
            to enter upon the Demised Premises:

            5.6.1.1 To examine their condition and to take schedules of
                    repairs and the like and inventories of fixtures and
                    fittings plant and machinery

            5.6.1.2 To execute any works of construction repair decoration
                    or any other nature on any adjoining or neighbouring
                    premises or to carry out any repairs decorations or
                    other work which the Landlord must or may carry out
                    under the provisions of this Lease upon or to the
                    Demised Premises

            5.6.1.3 For any other purpose connected with the interest of the
                    Landlord in the Demised Premises including (without
                    prejudice to the generality of the foregoing) for the
                    purpose of valuing or disposing of any interest of the
                    Landlord or any Superior Landlord or doing anything
                    which may be necessary to prevent a forfeiture of any
                    superior lease for the time being affecting the Demised
                    Premises

            5.6.1.4 Where the Tenant or occupier of the Demised Premises
                    will have no right to renew this Lease under the
                    Landlord and Tenant Act 1954 or has lost that right to
                    permit the Landlord or his agent in the last six months
                    of the Term of affix a sign or signs indicating that the
                    Demised Premises are to let

      5.6.2 If as a result of an inspection or otherwise the Landlord Becomes
            aware of any breaches of covenant by the Tenant hereunder the
            Landlord may give notice in writing thereof to the Tenant and the
            Tenant shall immediately in the case of emergency or otherwise
            within such reasonable period as the Landlord shall stipulate remedy
            such breach of covenant in accordance with such notice and the
            covenants contained in the Lease to the reasonable satisfaction of
            the Landlord AND if the Tenant shall fail within a reasonable time
            of such notice or immediately in case of emergency to commence and
            diligently and expeditiously continue to comply with such notice or
            if the Tenant shall at any time make default in the performance of
            any of the covenants contained in this Lease for or relating to the
            repair decoration or maintenance of the Demised Premises then
            (without prejudice to right or re-entry and forfeiture hereinafter
            contained) the Landlord may enter or in the case of emergency break
            and enter upon the Demised Premises and carry out or cause to be
            carried out all or any of the works referred to in such notice or
            remedy the default of the Tenant and in such circumstances the
            Landlord shall be under no liability to make good any damage
            whatsoever and all reasonable and proper costs of all such works and
            all expenses incurred in remedying such defaults in each case shall
            be paid by the Tenant to the Landlord on demand

5.7   Planning Acts and Environmental Acts and Acts generally

      5.7.1 To comply with all Acts (including without prejudice to the
            generality of the foregoing the Planning Acts and the Environmental
            Acts)

      5.7.2 At its own expense to obtain from the appropriate authorities all
            licences consents and permissions as may be required for the
            carrying out by the Tenant of any operations on or the use of any
            part of the Demise Premises and fully to comply with the conditions
            of any statutory authorisations

      5.7.3 To take all necessary steps to prevent the Demised Premises
            (including the land thereof) from being polluted by any act or
            process carried out by the Tenant and forthwith to clean up any
            pollution so caused

      5.7.4 To pay to the Landlord any clean up costs incurred by theLandlord as
            a result of the Tenant's failure to comply with Clause 5.7.3 whether
            such costs are incurred during or after the expiration of the Term

      5.7.5 Not to make any application for planning permission without first
            producing a copy of the same and obtaining the prior written consent
            of the Landlord to such application which consent shall not be
            unreasonably withheld or delayed

      5.7.6 Unless the Landlord shall otherwise in writing direct to carry out
            before the Termination Date any works stipulated to be carried out
            to the Demised Premises as a condition of any planning permission
            which may

<PAGE>

            have been granted during the Term and Implemented by the Tenant or
            any other person whether or not the date by which the planning
            permission requires such works to be carried out falls within the
            Term

      5.7.7 If reasonably required by the Landlord but at the cost of the Tenant
            to appeal against any refusal of Planning Permission or against the
            imposition of any conditions on a planning permission in either case
            made pursuant to an application therefore under this sub-clause

      5.7.8 Not to do anything in the Demised Premises or cause them to be
            occupied in such a way as will cause any part of any other land
            owned or occupied by the Landlord not to comply with any Act

      5.7.9 As soon as reasonably practicable on the receipt of notice thereof
            to give full particulars to the Landlord of any permission notice
            order or proposal relevant to the Demised Premises or to the use
            therof given to the Tenant or the occupier of the Demised Premises
            (together with a copy of any notice permission letter or document)
            under the Planning Acts or any other Act and without delay to take
            all necessary steps to comply therewith the written approval of the
            Landlord (such approval not to be unreasonably withheld) and also at
            the request and cost of the Landlord to make or join with the
            Landlord in making such objections and representations against or in
            respect of any such notice order or proposal as aforesaid as the
            Landlord shall reasonably require

5.8   Outgoings costs and fees

      5.8.1 To pay and discharge all Outgoings which now are or may be charged
            levied assessed or imposed upon the Demised Premises or upon the
            owner or occupier thereof and to pay bear and discharge the
            proportion properly and fairly attributable to the Demised Premises
            of any Outgoings as may be charged levied assessed or imposed upon
            any premises of which the Demised Premises form part such proportion
            to be determined by the Surveyor for the time being to the Landlord
            whose decision shall be final provided that the Landlord's Surveyor
            shall use proper skill and judgement and not to make any claim for
            relief against Outgoings payable in respect of the Demised Premises
            without the Landlord's prior written consent provided that such
            consent shall not be unreasonably withheld or delayed

      5.8.2 To pay to the Landlord on demand a due proportion to be conclusively
            determined by the Landlord's Surveyor of all costs charges and
            expenses including Surveyor's and other professional fees (if any)
            and including a management charge of 10% of such costs charges
            expenses and fees incurred in connection with or relating to or
            making future provision for Management Services

      5.8.3 To pay to the Landlord on demand all reasonable and proper costs
            charges and expenses (including professional advisers' costs and
            fees) incurred by the Landlord or any Superior Landlord
<PAGE>

            5.8.3.1 In or in proper contemplation of any proceedings under
                    Section 146 or 147 of the Law of Property Act 1925
                    including the preparation and service of notice
                    thereunder (notwithstanding forfeiture is avoided
                    otherwise than by relief granted by the Court)

            5.8.3.2 In the preparation and service of any schedule of
                    dilapidations at any time during or after the Term

            5.8.3.3 In connection with any breach of covenant by or the
                    recovery of arrears of rent due from the Tenant
                    hereunder

            5.8.3.4 In respect of any application for consent required by
                    this Lease Whether or not such consent be granted save
                    where consent is unreasonably withheld

            5.8.3.5 In the negotiation preparation and completion of this
                    Lease and the counterpart thereof

      5.8.4 If any payments are to be made by the Tenant under this Lease to the
            Landlord or any person on the Landlord's behalf the Tenant shall pay
            any VAT which is or may become payable in respect thereof together
            with interest PROVIDED always that the person to whom such payments
            are to be made shall (if appropriate) have elected to waive its
            exemption from VAT and in any event shall have supplied the Tenant
            with an appropriate VAT invoice

5.9   New Guarantor

      Within fourteen days of the Tenant becoming aware of the death during the
      Term of any person who has or shall have guaranteed to the Landlord the
      Tenants obligations contained in this Lease or of such person becoming
      bankrupt or having a Receiving Order made against him or being a Company
      passing a Resolution to wind up or entering into liquidation then to give
      notice thereof to the Landlord and if so required by the Landlord at the
      expense of the Tenant within twenty eight days to procure some other
      person reasonably acceptable to the Landlord to execute a guarantee in
      respect of the Tenants obligations contained in this Lease incorporating
      the covenants set out in the Fourth Schedule hereto

5.10  Superior Interest

      If this Lease shall at any time be an underlease to comply with all the
      tenant's covenants contained in all superior leases (other than the
      covenants to pay rent) provided that they are no more onerous on the
      Tenant than those contained in this Lease as if such covenants were set
      out in this Lease in full as covenants to be performed by the Tenant


<PAGE>
5.11  Material Development

      Unless required to enable the Tenant to use the Demised Premises in
      accordance with clause 5.4.1 of this Lease or to comply with any other
      provisions of this Lease not to carry out on any part of the Demised
      Premises any development for which planning permission may be required or
      which may lead to a fiscal imposition on the Landlord unless the Landlord
      shall agree thereto in writing (which agreement may be given on such terms
      and subject to such conditions as the Landlord shall in its absolute
      discretion determine)

5.12  Indemnity

      To keep the Landlord fully indemnified against all damages losses costs
      expenses proceedings and liabilities arising directly or indirectly out of
      the existence state of repair or user of the Demised Premises any breach
      of the Tenants covenants herein contained

6     Covenants by the landlord

6.1   The Landlord COVENANTS with the Tenant as follows:

      6.1.1 Quiet enjoyment- that the Tenant paying the rents reserved observing
            and performing its covenants and conditions contained in this Lease
            may peaceably and quietly hold and enjoy the Demised Premises
            without any lawful interruption by the Landlord or any person
            rightfully claiming through under or in trust for it

      6.1.2 Superior Lease rents

            6.1.2.1 To pay the rents reserved by any superior lease for the
                    time being in force and to comply with the terms of any
                    superior lease in relation to all parts of the Building
                    not comprised in the Demised Premises

            6.1.2.2 On the request of the Tenant to use all reasonable
                    endeavours to enforce the covenants on the part of the
                    Superior Landlord and to use all reasonable endeavours
                    to obtain the consent of any superior landlord required
                    under any superior lease when:

                    a)    The Tenant has applied for consent under this Lease

                    b)    The Landlord gives consent or could not reasonably
                          refuse it or gives it subject to conditions being
                          obtainable fromany superior landlord or

                    c)    Consent is required under any Superior Lease

7.    Provisos

      IT IS HEREBY AGREED AND DECLARED as follows:

7.1   Re-entry
<PAGE>

      Notwithstanding and without prejudice to any other remedies and powers
      herein contained or otherwise available to the Landlord if the rents
      reserved or any part thereof shall be unpaid for twenty one days after
      becoming payable whether formally demanded or not or if any covenant on
      the Tenant's part or condition contained in this Lease shall not be
      performed or observed or if the Tenant's for the time being (being a
      Company) enters into liquidation whether compulsory or voluntary (save for
      the purpose demonstrated to the Landlord's satisfaction of reconstruction
      or amalgamation whilst solvent) or passes a resolution for winding up
      (save as aforesaid) or is unable to pay its debts within the meaning of
      Sections 122 and 123 of the Insolvency Act or summons a meeting of its
      creditors or any of them under Part 1 of the Insolvency Act or suffers a
      petition for an Administration Order in respect of it to be file din Court
      or suffers a receiver or administrative receiver to be appointed or being
      an individual or being more than one individual anyone of them has a
      receiving order made against him or becomes bankrupt or is unable to pay
      or has no reasonable prospect of being able to pay his debts within the
      meaning of Sections 267 and 268 of the Insolvency Act or if the Tenant (or
      if there is more than one Tenant any of them) enters into composition with
      his or their creditors or suffer any distress or execution to be levied on
      his or their goods or if an interim order Is made under Part VIII of the
      Insolvency Act then and in any such case it shall be lawful for the
      Landlord at any time thereafter to re-enter upon the Demised Premises or
      any part thereof in the anme of the whole and thereupon this demise shall
      absolutely determine but without prejudice to any right of action or
      remedy of the Landlord in respect of any breach non-observance or
      non-performance of any of the Tenant's covenants or any conditions herein
      contained

7.2   Service of Notices

      Any demand or notice to be served on the Tenant or any Surety hereunder
      shall be validly served if sent by first class post addressed to the
      Tenant or the Surety respectively (and if there shall be more than one of
      them then to any of them) at its registered office or its last known
      address or at the Demised Premises Any notice to be served on the Landlord
      shall be validly served if sent by first class post addressed to the
      Landlord at its registered office Any demand or notice sent by post shall
      be conclusively treated as having been served Forty eight hours after
      posting Provided that whilst the Tenant is National Co-operative Chemists
      Limited notices shall only be effective if served at its registered office

7.3   Adjoining land

      Nothing in this Lease shall prevent the Landlord and all persons
      authorised by it without requiring any consent from or making any
      compensation to the Tenant dealing as it or they may think fit with any
      land or buildings adjacent or near to the Demised Premises erecting or
      suffering to be erected on any part of such land any buildings or
      structures whatsoever or making any alterations or additions or carrying
      out any demolition or rebuilding whatsoever which it or they may think fit
      and without prejudice to the generality of the foregoing notwithstanding
      that such buildings alterations or additions shall affect or diminish the
      light or air which may nor or at any time during the Term be enjoyed by
      the Demised Premises provided that it shall use all reasonable endeavours
      to procure that the

<PAGE>

      minimum disruption is caused to the Tenant's trade or business permitted
      under this Lease

7.4   No liability in damages

      The Landlord shall not in any circumstances incur any liability in respect
      of damage to person or property or otherwise howsoever by reason of any
      act neglect default or misfeance of the Landlord its servants employees
      agents or independent contractors or by reason of any accidental damage
      which may at any time be done to the Demised Premises or to any of the
      goods persons or property of the Tenant or any other person in performance
      of any services for the Tenant at the Tenant's request but this exclusion
      does not apply to obligations specifically imposed on the Landlord by this
      Lease

7.5   Failure to perform obligations

      7.5.1 The Landlord shall not in any event be liable to the Tenant in
            respect of any failure of the Landlord to perform any of its
            obligations to the Tenant hereunder whether expressed or implied
            unless the Tenant has so notified the Landlord and the Landlord has
            failed within a reasonable time to remedy the same and then in such
            case the Landlord shall be liable to compensate the Tenant only for
            loss or damage sustained by the Tenant after such reasonable time
            has elapsed

      7.5.2 Without prejudice to the generality of the foregoing the Landlord
            shall not be liable to the Tenant nor shall the Tenant have any
            claim against the Landlord in respect of any interruption to the
            Services referred to in clause 6.1.3 of this Lease provided the
            Landlord has used all reasonable endeavours to perform the same by
            reason of necessary repair renewal or maintenance of any
            installations or apparatus Comprised therein or by reason of any
            other cause whatsoever outside the reasonable control of the
            Landlord or other defect or breakdown frost or other inclement
            conditions or unavoidable shortage of fuel materials water or labour
            or any act omission or negligence of any servant of the Landlord in
            or about the performance or purported performance of any duty
            relating to the provisions of the Management Services or any of them

7.6   Statutory compensation

      Except where any statutory provision prohibits the Tenant's right to
      compensation being reduced or excluded by agreement the Tenant shall not
      be entitled to claim from the Landlord on quitting the Demised Premises or
      any part thereof any compensation under the Landlord and Tenant Act 1954

7.7   Exclusion of rights not granted

      Nothing herein contained shall operate expressly or impliedly to confer
      upon or grant to the Tenant any easement right or privilege other than
      those expressly hereby granted and set out in the First Schedule hereto
<PAGE>

7.8   Tenant's acknowledge

      Nothing contained in this Lease shall imply or warrant that the Demised
      Premises may in accordance with the Planning Acts be used for the purpose
      herein authorised and the Tenant hereby acknowledges and admits that the
      Landlord has not given or made at any time any representation or warranty
      that any such use is or will be or will remain a permitted use under the
      Planning Acts

8     Covenants By and Provisions Relating to the Surety

      The Surety hereby:

8.1   covenants with the Landlord in the terms set out in the Fourth Schedule
      hereto

8.2   submits to the jurisdiction of the English Courts

8.3   acknowledges that this Lease is governed by English Law

8.4   confirms and nominates as its address for service ("the service address")
      Unit 1, Norwood Road, March, Cambridgeshire

8.5   consents to the service of all notices and proceedings in connection
      with this Lease at the service address

8.6   acknowledges that the jurisdiction and service of proceedings as
      hereinbefore provided are non-exclusive and shall not limit any other
      rights or remedies of the Landlord under the laws of any jurisdiction
      where assets of the Tenant or the Surety may be found and

8.7   warrants that it has power to enter into this Lease and to covenant as
      herein set out and that it will at its own cost produce to the Landlord a
      certificate duly given by an Attorney at Law qualified to practice in the
      State in which the Surety is incorporated that the manner in which this
      Lease has been executed by the Surety complies with all statutes and
      regulations relating to or affecting the Surety

      IN WITNESS whereof the parties hereto have executed and delivered this
      Lease as a Deed on the date specified and the Particulars

                      THE FIRST SCHEDULE above referred to
                         (Rights and easements granted)

1.    The right for the Tenant its servants and employees and visitors and those
      authorised by it in common with the Landlord any superior landlords those
      authorised by either or any of them and all others having the same right:

2.    To the free and uninterrupted passage of services and facilities
      through the Conduits under or over the Estate and now or at any time
      during the Term serving the Demised Premises
<PAGE>

3.    To pass with or without vehicles over the Access Roadway and circulation
      areas for the purpose of access to and egress from the Demised Premises
      and the Service Yard (and the right to park temporarily on the Service
      Yard and circulation area in order to use the loading doors at the front
      of the Demised Premises)

4.    To use such of the Common Parts for all proper purposes in connection
      with the use and enjoyment of the Demised Premises including (for
      example) to pass and to repass to and from the Demised Premises

5.    The right to install and maintain security equipment on the Demised
      Premises with the consent of the Landlord such consent not to be
      unreasonably withheld or delayed

6.    The right to erect and maintain on the exterior of the Demised Premises
      the Tenant's normal trade signage from time to time and such other signage
      as may be agreed by the Landlord such agreement not to be unreasonably
      withheld or delayed

                      THE SECOND SCHEDULE above referred to
                         (Rights and easements excepted)

The following rights and easements are excepted and reserved out of the Demised
Premises to the Landlord any superior landlords and their respective tenants and
the occupiers of any adjoining or neighbouring premises and all other persons
authorised by the Landlord or any superior landlord or having the like rights
and easements:

1.    The free and uninterrupted passage of services and facilities through the
      Conduits which are now or may at any time during the Term be in the
      Demised Premises with the right to repair maintain and renew such Conduits
      and the right at any time but on Requisite Notice to the Demised Premises

2.    The right to build rebuild or execute any other works upon any adjacent or
      nearby premises in such manner as the Landlord may think fit
      notwithstanding any interference with or damage caused thereby to the
      Demised Premises or to the access or enjoyment of light and air to or in
      respect of the Demised Premises Provided that the Landlord uses reasonable
      endeavours to procure that the minimum disruption or interference shall be
      caused to the business or trade of the Tenant

3.    The support and protection from the Demised Premises enjoyed by
      buildings now or hereafter to be erected

4.    The right at any time on Requisite Notice to the Demised Premises in order
      to a) inspect or view the condition of the Demised Premises b) carry out
      work upon any Conduits or adjacent premises and c) to carry out any
      repairs or other work or do anything which the Landlord must or may carry
      out or do under the provisions of this Lease

5.    The right with the Landlord's Surveyor or any other surveyor acting for
      the Landlord at any time on requisite notice to enter to inspect and
      measure the Demised Premises for all purposes connected with any pending
      or intended step under Part II of the 1954 Act

                      THE THIRD SCHEDULE above referred to

1.    In this Schedule the following expressions shall have the following
      meanings:

1.1   The Rent Review Dates are specified in the Particulars

1.2   The "relevant review date" shall mean the Rent Review Date at which the
      rent is to be reviewed

1.2   "Open market rent" shall mean the best yearly rent for which the Demised
      Premises could reasonably be expected to be let with vacant possession on
      the relevant review date in the open market by a willing lessor to a
      willing lessee without taking a fine or premium for the Term from the
      relevant review date with provisions similar to those contained herein for
      rent review at the rent review intervals and otherwise upon the terms and
      conditions (save as to the amount of rent) as are herein contained on the
      assumption (if not a fact) that the Demised Premises and the Estate are in
      good and substantial repair and free from defects (whether or not
      inherent) that the Demised Premises are ready and lawfully capable of use
      for immediate beneficial occupation without the need for any works by the
      Tenant that any necessary licences or permissions for such use have been
      obtained and will continue throughout the Term and that all the Tenant's
      and the Landlord's covenants have been complied with but there being
      disregarded

      1.3.1 Any effect on rent of the fact that the Tenant or an undertenant may
            have been in occupation of the Demised Premises

      1.3.2 Any goodwill attached to the Demised Premises by reason of any trade
            or Business carried on therein by the Tenant or any undertenant

      1.3.3 Any effect of any improvement made by the Tenant for the time being
            after the date hereof otherwise than pursuance of an obligation to
            the Landlord

      1.3.4 Any effect on rent of any free period or periods generally available
            in the Market or of any other inducements given or allowed to the
            Tenant generally

2.    From and after each Rent Review Date the rent hereinbefore first reserved:
      (hereinafter called "the new rent") shall be whichever is the higher of:

2.1   The yearly rent operative immediately before the relevant review date and

2.2   The open market rent of the Demised Premises
<PAGE>

3.    If the Landlord and Tenant shall be able to agree the new rent or when the
      new rent shall have been determined in accordance with the provisions
      hereof as the case may be a memorandum of the new rent in the form set out
      in the Fifth Schedule shall be prepared in duplicate by the Landlord's
      solicitors and Signed by the parties hereto and annexed to this Lease and
      the Counterpart Hereof

4.    If three months before the relevant review date the Landlord and the
      Tenant shall not have agreed on the new rent payable from the relevant
      date the Landlord or Tenant may at any time thereafter but before the rent
      shall be Agreed between the Landlord and the Tenant require an independent
      Surveyor (hereinafter called "the Surveyor") to determine the open market
      rent

5.    The Surveyor may be agreed upon by the Landlord and the Tenant and in
      default of such agreement shall be appointed on the application of either
      party by the President for the time being of the Royal Institution of
      Chartered Surveyors or such professional body of Surveyors as the Landlord
      shall designate or the person designated by such Institution or body for
      such purpose and any reference hereafter to the President shall be deemed
      to include a reference to such officer

6.    Notice in writing of his appointment shall be given by the Surveyor to the
      Landlord and the Tenant and he shall invite each to submit within a
      specified period (which shall not exceed four weeks) a valuation
      accompanied if desired by a statement of reasons

7.    The Surveyor (who shall be a Chartered Surveyor experienced in the letting
      and/or valuation of premises of a similar nature to and situate in the
      same region as the Demised Premises and used for purposes similar to those
      authorised hereunder at the date of his appointment) shall at the option
      of the Landlord exercised by notice in writing at or prior to the
      appointment act either as an arbitrator pursuant to the provisions of the
      Arbitration Acts 1950 and 1979 or as an expert valuer whose decision shall
      be final and binding on all persons who are or have been parties hereto
      (and in default of notice shall act as an arbitrator)

8.    The Surveyor shall give notice in writing of his decision to the Landlord
      and the Tenant within two months of his appointment or within such
      extended period as may be reasonable

9.    If the Surveyor shall fail to determine the open market rent and give
      notice thereof within the time and in the manner provided or if he shall
      relinquish his appointment or die or if it shall become apparent that for
      any reason he will be unable to complete his duties the Landlord may apply
      to the President for a substitute to be appointed in his place which
      procedure may be repeated as many times as necessary

10.   If by the relevant review date the new rent shall not have been agreed or
      determined (whether or not negotiations shall have commenced) the Tenant
      appointed by this Lease for payment of rent until the new rent shall have
      been

<PAGE>

      agreed or determined and thereupon the Tenant shall pay to the Landlord as
      arrears of rent an amount equal to the difference between the new rent and
      the rent actually paid for the period since the relevant review date
      together with Interest thereon from the relevant review date

11.   The fees of the Surveyor (including any costs of appointment) shall be
      shared as the Surveyor shall determine and in default shall be shared
      equally

12.   As respects all periods of time referred to in this Schedule time shall be
      deemed not to be of the essence

13.   If on any Rent Review Date there shall be in force any Act which shall
      restrict interfere with or affect the Landlord's right to revise the rent
      hereby reserved in accordance with the terms hereof or to collect the full
      amount of any increased rent then the Landlord shall be entitled once
      following each removal or modification of such Act to serve notice
      requiring a review of the said rent (hereinafter called an "interim
      notice") upon the Tenant and from and after the date of service of such
      interim notice until the next Rent Review Date the new rent shall be
      determined in accordance with Clauses 2 12 inclusive of this Schedule with
      the substitution of the said date of service for the relevant Review date

                      THE FOURTH SCHEDULE above referred to
                            (Covenants by the Surety)

1.    THAT the Tenant will throughout the contractual term of this lease as
      well as before any disclaimer of their Lease pay the rents hereby
      reserved as from time to time reviewed on the days and in the manner
      aforesaid and will observe and perform all the covenants on the part of
      the Tenant and the conditions contained in this Lease and that in case of
      default or delay on the part of the Tenant the Surety will pay and make
      good to the Landlord on demand anything whatsoever which ought to be paid
      observed or performed as aforesaid including all losses damages costs and
      expenses thereby arising or incurred by the Landlord provided that as
      between the Surety and the Landlord the liability of the Surety shall be
      as a principal debtor or covenator and provided further that no neglect
      or forbearance by the Landlord inendeavouring to obtain payment of the
      said rents or enforcing the observance and performance of the said
      covenants and conditions nor any time which may be given to the Tenant by
      the Landlord shall release exonerate or in any way affect the liability
      of the Surety hereunder and provided further that the Surety's covenants
      herein contained shall remain valid and binding on the Surety
      notwithstanding any variation in the terms of the said covenants and
      conditions agreed between the Landlord and the Tenant for the time being
      except where a variation increases an obligation of the Tenant or imposes
      a new obligation on the Tenant the Surety will not be liable in respect
      of that variation but will be liable on the terms of this Lease without
      that variation any disposition of the Landlord's reversion or any part
      thereof any disposition of this Lease by the Tenant the release of any
      one or more persons for the time being constituting the Surety or any
      other act omission matter or thing whatever whereby (but for this
      provision) the Surety would be exonerated either wholly or in part from
      the said covenants other than a release under seal given by the Landlord
<PAGE>

2.    THAT if the Tenant shall cease to exist (whether by being wound up or
      struck off the register of companies or otherwise howsoever) or if any
      liquidator or trustee In bankruptcy of the Tenant shall disclaim this
      Lease or if this Lease shall be or become forfeited the Surety or such of
      the persons for the time being comprising the Surety as the Landlord
      shall choose will forthwith upon being required to do so by the Landlord
      by written notice given at any time within two months of the date upon
      which the Landlord has actual notice that the Tenant has ceased to exist
      or that this Lease has been disclaimed or of such forfeiture as the case
      may be take up a new lease of the Demised Premises (subject to and with
      the benefit of this Lease if and insofar as the same is subsisting) and
      deliver to the Landlord a duly executed counterpart thereof for a new
      term commencing on the day after the Tenant ceased to exist or the
      effective date of disclaimer or forfeiture as the case may be and
      expiring on the day on which the Term was due to expire and otherwise on
      the same terms (mutates mutandis) as these presents and shall pay rent as
      from the commencement of the new term and all costs in connection with
      the giving notice and the granting of the new lease

3.    THAT so long as any moneys remain or could be or remain owing by the
      Surety under this Clause the Surety shall not:

      a)    claim or seek to enforce repayment or subrogation or otherwise of
            any sums for the time being due to the Surety by the Tenant

      b)    in the event of liquidation of the Tenant prove in competition with
            the Landlord in respect of any moneys owing to the Surety by the
            Tenant but will give to the Landlord the benefit of any such proof
            and of all monies to be received in respect thereof until all monies
            owing by the Tenant to the Landlord shall have been paid in full

4.    THAT if the Landlord shall not require the Surety to take a Lease of
      the Demised Premises pursuant to Paragraph 2 above the Surety shall
      nevertheless upon demand pay to the Landlord a sum equal to the rent that
      would have been payable under this Lease but for the surrender or
      disclaimer or forfeiture in respect of the period from the date of such
      surrender or disclaimer or forfeiture (as the case may be) until the
      expiration of three months from it or until the Demised Premises shall
      have been re-let by the Landlord whichever shall first occur

5.    AS a separate and independent stipulation that without prejudice to the
      rights of the Landlord against the Tenant as principal any liability
      mentioned above which may not be recoverable on the footing of a
      guarantee whether by reason of any legal limitation on or disability or
      incapacity of the Tenant or any other fact or circumstance and whether
      known to the Landlord or not shall nevertheless be recoverable from the
      Surety as though the same had been incurred by the Surety and the Surety
      was the sole or principal debtor in respect thereof and shall be paid by
      the Surety on demand together with Interest (as well before as after any
      judgement)

6.    THAT provisions of this Schedule shall be in addition to and not in
      substitution for any other rights which the Landlord may have and may be

<PAGE>

      enforced against the Surety without first having recourse to any such
      rights and without taking any steps to proceedings against the Tenant

7.    THAT no assurance security or payment which may be avoided under any
      provision or enactment relating to liquidation or insolvency for the time
      being in force (including but not limited to Sections 615 and 617 of the
      Companies Act 1985 and Sections 238 239 339 and 340 of the Insolvency Act)
      nor any release settlement or discharge of the Surety which may have been
      given or made on the faith of any such assurance security or payment shall
      prejudice or affect the right of the Landlord to recover from the Surety
      to the full extent of this Clause as if such release settlement or
      discharge had not occurred

                      THE FIFTH SCHEDULE above referred to
                           (Memoranda of Rent Reviews)

Pursuant to the provisions of the Third Schedule of the Lease dated 2001 and
made between [the Landlord] (1) and [the Tenant] (2) it has been
[agreed/determined] that the rent payable from the [first/second/third/fourth]
Rent Review Date specified in the particulars is Pounds per annum

Signed.........................................

Duly authorised signatory of the Landlord/Tenant/Surety
(note: delete/amend as necessary)

                               THE SIXTH SCHEDULE
                        (Authorised Guarantee Agreement)

                                LICENCE TO ASSIGN
                                       AND
                              AUTHORISED GUARANTEE
                                    AGREEMENT
                           under the Lease relating to

THIS DEED is made the day of BETWEEN:

of
("the Landlord")

2)
of
("the Tenant")

3)
of
("the Assignee") and

INTRODUCTION:

A)    This deed is supplemental to a Lease ("the Lease") dated the

<PAGE>

      Day of              2001 made between [                                 ]
      (1) and               (2) by which the premises known as
      ("the premises") were demised for a term of 25 years from the day of 25
      years from the day of 2001 ("the Term") subject to the payment of the rent
      reserved by and the performance and observance of the covenants on the
      Tenant's part and the other provisions contained in the Lease

B)    The reversion immediately expectant on the determination of the Term
      [remains or is now] vested in the Landlord and the unexpired residue of
      the Term [remains or is now] vested in the Tenant

C)    The Lease contains provisions prohibiting the Tenant from assigning the
      Premises without the [licence or consent] on the terms set out below to
      Enable the Tenant to assign [its] estate and interest in the Premises to
      the Assignee

THIS DEED WITNESSES:

1.    IN this deed unless the context otherwise dictates:

      1.1   "the Landlord" includes the person in whom the reversion immediately
            expectant on the determination of the Term is for the time being
            vested

      1.2   "the Lease" includes all or any deeds and documents supplemental to
            the Lease whether or not expressed to be so

      1.3   "the Term" includes any continuation or extension of the Term and
            any holding over whether by statute at common law or otherwise

2.    THE Landlord (at the request of the other parties) grants to the Tenant
      licence ("the Licence") to assign the whole of the Tenant's estate and
      interest in the Premises to the Assignee within Thirty days after the date
      of this deed

3.    THE Assignee covenants with the Landlord:

      3.1   That at all times following the permitted Assignment ("the
            Assignment") the Assignee will for the residue of the said term or
            until such estate and interest is further assigned (other than by an
            excluded assignment within the meaning of Section 11 of the Landlord
            and Tenant (Covenants) Act 1995) whichever is the shorter period pay
            the rent[s] reserved by and observe and perform the covenants on the
            Tenant's part and the other provisions contained in the Lease

      3.2   That immediately after completion of the Assignment the Assignee
            will give the Landlord written notice of the date on which the
            Assignment was completed and of the name and address of the person
            to whom future rent demands should be sent and will supply to the
            Landlord for registration a copy (duly certified to be true and
            accurate by a solicitor) of the deed effecting the Assignment and
            pay such registration fee as is specified in clause of the Lease
<PAGE>

4.    THE Tenant covenants with the Landlord as a primary obligation (and
      without the need for any express assignment with all its successors in
      title) that:

      4.1   At all times after the completion of the Assignment the Assignee
            will For the residue of the said term or until such estate and
            interest is further assigned (other than by an excluded assignment
            within the meaning of Section 11 of the Landlord and Tenant
            (Covenants) Act 1995 whichever is the shorter period) punctually pay
            the rent[s] reserved by and observe and perform the covenants on the
            Tenant's part and the other provisions contained in the Lease and if
            during the said period the Assignee makes any default therein the
            Tenant will pay the rent and observe or perform those covenants or
            provisions in respect of which the Assignee is in default and make
            good to the Landlord on demand and indemnify the Landlord against
            all losses damages costs and expenses arising or incurred by the
            Landlord as a result of the non-payment non-performance or
            nonobservance notwithstanding:

            4.1.1 any time or indulgence granted by the Landlord to the Assignee
                  or any neglect or forbearance of the Landlord in enforcing the
                  payment of the rent or the observance of performance of the
                  Tenant's covenants or other provisions contained in the Lease
                  or any refusal by the Landlord to accept rent tendered by or
                  on behalf of the Assignee at a time when the Landlord was
                  entitled (or would after the service of a notice under Section
                  146 of the Law of Property Act 1925 have been entitled) to
                  re-enter the Premises

            4.1.2 that the Assignee may have surrendered part of the Premises in
                  which event the liability of the Tenant hereunder will
                  continue in respect of the part of the Premises not so
                  surrendered after making any necessary appointments under
                  Section 140 of the Law of Property Act 1925

      4.2   If at any time during the Term of Assignee (being an individual)
            Becomes bankrupt or (being a company) enters into liquidation and
            the trustee in bankruptcy or liquidator disclaims the Lease the
            Tenant will if the Landlord by notice within two calendar months
            after the disclaimer so requires take from the Landlord a lease of
            the Premises for the residue of the Term which would have remained
            had there been no disclaimer at the rent then being paid under the
            Lease and subject to the same covenants and terms as in the Lease
            the new lease to take effect from the date of the disclaimer and in
            that case the Tenant will pay the reasonable costs of the new lease
            and execute and deliver to the Landlord a counterpart of it

5.    THE tenant FURTHER covenants with the Landlord:

      5.1   To pay the Landlord on demand and to indemnify the Landlord against
            all reasonable and proper costs charges fees disbursements and
            expenses (including those of professional advisers and agents and
            including in each case any Value Added Tax) incurred by the Landlord
            in connection with

<PAGE>

            the Licence or the Assignment including (without limitation) those
            arising from the consideration of the application for the Licence
            and the preparation negotiation and completion of this deed and
            arising from obtaining the consent or approval of or information
            from any other person except where the Landlord unreasonably refuses
            consent

      5.2   Not to allow the Assignee to enter into possession or occupation of
            the whole or any part of the Premises until completion of the
            Assignment

6.    IN the event of the Assignment not being completed within Thirty days
      after after the date of this deed or not being completed otherwise in
      accordance with this deed then the Licence and all other provisions of
      this deed (save for clause 5.1) will immediately determine and cease to
      have effect but without prejudice to any right of action vested in the
      Landlord by virtue of the Tenant's breach of covenant

7.    ALL sums payable by the Tenant under clause 5.1 of this deed are
      recoverable as rent in arrear

8.    NOTHING contained in this deed waives or may be deemed to waive any Breach
      of the obligations of the Tenant under the Lease which may have occurred
      prior to the date of this deed or authorise or be deemed to authorise any
      further assignments or any act omission or thing other than the Assignment
      And the covenants on the Tenant's part and all other provisions contained
      in the Lease continue in full force and effect to the extent permitted by
      law

      THE COMMON SEAL of E J Lord Limited
      was hereunto affixed) in the
      presence of


      Director

      Secretary

      THE COMMON SEAL of BioProgress Limited
      was hereunto affixed) in the
      presence of


      Director

      Secretary

      SIGNED AS A DEED on behalf of BioProgress Inc,
      a company incorporated in the State of                 USA

<PAGE>

      by                                               , being the person who,

      in accordance with the laws of that territory,
      Authorised Signatory

      is acting under the authority of the Company