Document:

ACQUISITION AGREEMENT

     THIS AGREEMENT (the "Agreement"), made as of the 20th day of
April,  2005 between DIONICS INC., a Delaware corporation  having
an  office at 65 Rushmore Street, Westbury, New York (hereinafter
referred to as "Seller") and 65 RUSHMORE REALTY, LLC, a New  York
limited  liability company with an office at 32-01 College  Point
Boulevard, Flushing, New York 11354 (hereinafter referred  to  as
"Purchaser").

                      W I T N E S S E T H:

      WHEREAS,  Seller  is the owner of fee title  to  a  certain
parcel  of real property and the improvements constructed thereon
located  at  65 Rushmore Street, Westbury, New York (Section  and
Block  11073,  Lot  00250) being more particularly  described  in
Exhibit   "A"  annexed  hereto  and  made  a  part  hereof   (the
"Property"); and

      WHEREAS, Seller wishes to sell to Purchaser all of Seller's
right, title and interest in the Property; and

     WHEREAS, upon and subject to the terms and conditions herein
contained  (and the Exhibits hereto), Seller agrees to  sell  and
convey and Purchaser agrees to purchase and acquire the Property.

     NOW, THEREFORE, in consideration of the foregoing and of the
mutual  covenants and agreements herein contained and subject  to
the conditions herein set forth, the parties agree as follows:

     1.   PURCHASE AND SALE.  In accordance with and subject to the
terms  and conditions of this Agreement, Seller agrees  to  sell,
convey,  transfer, and assign, and Purchaser agrees to  purchase,
acquire and assume, as the case may be, the Property;

           together with all and every right, title and  interest
of  Seller  in  and to the Property except as otherwise  provided
herein;

            together   with   all  easements,   privileges,   and
appurtenances, thereunto belonging; and

           together with all rights of Seller in and to  any  and
all leases, licenses, tenancies and occupancies made by Seller or
at  any  time  acquired by Seller in respect of the Property  and
except  as  otherwise  provided herein,  all  rents,  issues  and
profits  arising from or out of such leases, licenses,  tenancies
and  occupancies, nor existing or, subject to the terms  of  this
Agreement, or hereafter created in respect of the Property up  to
and including the Closing Date (as hereinafter defined).

     2.   PURCHASE PRICE.  The Purchase Price for the Property is Nine
Hundred  Ninety  ($990,000.00) Dollars, which shall  be  paid  by
Purchaser to Seller, as follows:

       a. Forty-Nine Thousand Five Hundred ($49,500.00) Dollars (the
          "Deposit"), on the signing of this Agreement, by check subject to
          collection, to the order of the Escrow Agent (for purposes of
          this Agreement, Seller's attorney, Certilman Balin Adler & Hyman,
          LLP shall be the "Escrow Agent") to be held in escrow in
          accordance with the terms of this Agreement; and

       b. Nine Hundred Forty Thousand Five Hundred ($940,500.00)
          Dollars on the Closing Date, certified funds, wire transfer of
          immediately available federal funds to an account or accounts
          designated by Seller or as otherwise directed by Seller on not
          less than three (3) business days written notice prior to the
          Closing Date.  Seller shall have the obligation to direct
          Purchaser in writing to pay part or all of the Purchase Price due
          hereunder to the payment of any liens including mortgages on the
          Property and to pay any expense of Seller with respect to this
          transaction.

          The sale also includes all personal property, plumbing,
heating,  air-conditioning systems and  all  other  fixtures  and
personal  property  attached  or  appurtenant  to  or   used   in
connection with the operation of the Property, if any,  owned  by
Seller presently on the Property, which is appurtenant to or used
in   the   operation  thereof.   Notwithstanding  the  foregoing,
Purchaser  acknowledges and agrees that all items of  personality
installed   by  Seller  in  connection  with  Seller's   business
operations,  whether attached to the Property or  movable,  shall
not  be  deemed personality included in the sale and shall remain
the personal property of Seller.

     3.   PERMITTED EXCEPTIONS.  Seller shall convey and Purchaser
shall  accept title to the Property in accordance with the  terms
of  this  Agreement  subject to the following  (collectively  the
"Permitted Exceptions"):

       a.   Any state of facts an accurate survey would show of the
          Property provided such state of facts (x) does not prohibit the
          continued current use of the Property, and (y) does not render
          title unmarketable or reduce the value of the Property.

       b.   The exceptions listed on Exhibit "B" annexed hereto, and
          made a part hereof (the "Additional Permitted Exceptions").

     4.   SERVICE AND EMPLOYMENT AGREEMENTS.  Any and all existing
service  and  employment contracts will remain  in  the  name  of
Seller.   Any obligations under any and all existing service  and
employment  contracts will remain the obligation of Seller,  with
no obligations whatsoever to Purchaser.

     5.   VIOLATIONS.  Seller, at Seller's sole cost and expense,
shall  be  obligated to remove all notes or notices of violations
of  law or municipal ordinances, orders or requirements noted  in
or  issued both prior to and subsequent to the date hereof by any
governmental  department  having  authorization  as   to   lands,
housing,   buildings,  fire,  health,  labor,  zoning   and   use
conditions  affecting all or any portion of the Property.  Seller
shall  deliver copies of documents evidencing the removal of  the
foregoing  to Purchaser no less than five (5) days prior  to  the
Closing Date.

     6.   CONDITION OF PROPERTY/CERTIFICATE OF OCCUPANCY.

       a.   Purchaser acknowledges that it has fully examined the
          Property and is purchasing the Property in an "as is" condition
          "with all faults" and specifically and expressly without any
          warranties, representations or guarantees, from or on behalf of
          the Seller and its agents, except as otherwise set forth in this
          Agreement.

       b.   It shall be a condition of Closing that a valid and existing
          Certificate of Occupancy, or other required certificate of
          compliance, or evidence that none was required, covering the
          buildings and all of the other improvements located on the
          Property authorizing the continued current use of the Property
          has been issued by the municipality having jurisdiction over the
          Property.  Subject to the provisions of Paragraph 7 below, Seller
          shall deliver a valid and subsisting Certificate of Occupancy, or
          other required certificate of compliance, or evidence that none
          was required, covering the buildings and all of the other
          improvements located on the Property authorizing the continued
          current use of the Property.

       c.   Purchaser may enter upon the Property at any time or times
          during the effectiveness of this Contract for the purpose of
          performing environmental tests, including invasive testing to the
          soil and the ground water (such environmental tests, together
          with such entry upon the premises is as necessary to perform
          them, being collectively referred to herein as the "Due
          Diligence"), provided the premises is not damaged thereby or, if
          damaged, the premises is returned to the condition it was in
          prior to such Due Diligence. Notwithstanding anything herein to
          the contrary, Purchaser shall have a period of sixty (60) days
          from the date of Seller executing this Agreement ("Due Diligence
          Period") to conduct the Due Diligence. If purchaser shall find a
          Hazardous Condition or violation of any applicable Environmental
          Laws as defined below, Purchaser shall have the right, by written
          notice to Seller, to cancel this Contract on or before the
          expiration of the Due Diligence Period and promptly receive a
          return of the Downpayment from the Escrowee subject, however, to
          the Seller's right to cure such Hazardous Condition or violation
          of any applicable Environmental Laws in which event Purchaser
          shall be required to close title, however nothing contained
          herein shall require Seller to cure such Hazardous Condition or
          violation of any applicable Environmental Laws. In the event
          Purchaser does not give such written notice of termination to
          Seller on or before the expiration of the Due Diligence Period,
          the Purchaser's right to terminate hereunder shall automatically
          expire and the parties shall continue to perform their respective
          obligations hereunder. Purchaser shall indemnify and save
          harmless Seller from and against any and all damages for
          liability resulting solely from Purchaser's negligence or willful
          misconduct in performing the Due Diligence.

       d.   Notwithstanding anything to the contrary contained in this
          Contract, in the event that the Purchaser's Phase I or Phase II
          environmental investigation of the Premises during the Due
          Diligence Period discloses (1) the presence of any Hazardous
          Substances on or about the Premises or (2) a violation of any
          applicable Environmental Laws which require remediation, the
          Purchaser shall (i) provide Seller with a copy  of  its
          environmental reports, which environmental reports shall include
          recommendations and a cost estimate to remedy such condition, and
          (ii) have the option to be exercised by written notice to Seller
          given by no later than the date of the expiration of the Due
          Diligence Period to terminate this Contract and receive a refund
          of the Downpayment  made hereunder and in such event, neither
          party shall have any further claims against the other by reason
          of this Contract except, as expressly set forth in this Contract
          as surviving the termination of this Contract. In no event shall
          the Purchaser have the right to adjourn the closing date as a
          result of such environmental condition nor shall such remediation
          be a condition of closing. "Environmental Laws" as used herein
          means any federal, state, local or foreign law, treaty judicial
          decision, regulation, rule, judgment, order, decree, injunction,
          permit, agreement or governmental restriction or requirement,
          whether now or hereinafter in effect, relating to human health
          and safety, the environment or to pollutants, contaminants,
          wastes or chemicals or any toxic, radioactive, ignitable,
          corrosive, reactive or otherwise hazardous substance, waste or
          material. "Hazardous Substances" as used herein means any
          pollutant, contaminant, waste or chemical or any toxic,
          radioactive, ignitable, corrosive, reactive or otherwise
          hazardous substance, waste or chemical, or any substance, waste
          or material having any constituent elements displaying any of the
          foregoing characteristics, including, without limitation,
          petroleum, its derivatives, by-products and other hydrocarbons,
          and  any  substance, waste or material regulated  under
          Environmental Laws.

       e.   Seller represents that, to the best of its knowledge, the
          Property is in compliance with any and all applicable codes,
          laws, regulations, statutes, ordinances, covenants, conditions or
          restrictions and any governmental or quasi-governmental entity or
          of any person or entity.  Seller represents that the Property is
          in compliance with any environmental or occupational protection,
          pollution, subdivision or land use laws, rules, regulations,
          orders or requirements including but not limited to, those
          pertaining to the handling, generating, treating, storing or
          disposing of any hazardous waste material or substance.

       f.   Purchaser acknowledges that Seller is presently occupying
          the Property, is the sole occupant and tenant of the Property,
          that no other person or entity has any rights to occupy the
          Property, and it is a material condition of this Agreement that
          Seller shall continue to occupy the Property after Closing in
          accordance with the Lease annexed hereto as Exhibit "C"  (the
          "Lease") which shall be executed by Purchaser and Seller at
          Closing. Accordingly, Purchaser acknowledges and agrees that
          Seller shall not be obligated to remove any of its personal
          property from the Property prior to Closing and the Property will
          not be delivered vacant, broom clean and free of all tenancies at
          Closing.

     7.   TITLE INSURANCE REPORT.

       a.   Purchaser shall promptly order a title insurance commitment
          and furnish a copy of such commitment to Seller promptly upon
          receipt.  If Purchaser does not deliver such commitment to
          Seller's attorney within ten (10) days prior to the Closing Date,
          then Seller may give Purchaser notice of its failure to provide
          such commitment, and if Purchaser does not furnish such
          commitment within five (5) days of delivery of such notice to
          Purchaser's attorney, then Purchaser shall be deemed to have
          accepted any and all such defects which were or would have been
          revealed by such title insurance commitment.  Purchaser shall not
          be barred from raising any title objections which do not appear
          of record or which appear of record subsequent to receipt of the
          commitment.  Upon receipt of Purchaser's title insurance
          commitment, Seller shall eliminate all defects which are not
          Permitted Exceptions and which Purchaser has not accepted in
          writing.  In the event Seller is unable to eliminate such defects
          by the Closing Date, either party, by giving written notice to
          the other party, may elect to adjourn the Closing Date, for a
          period not to exceed thirty (30) days from the Closing Date in
          the aggregate in order to provide Seller with additional time in
          which to eliminate such defects.  However, Seller shall not be
          required to bring any action or proceeding or otherwise incur any
          expense to remove any Title Defect.  The existence of any taxes,
          liens, or encumbrances, other than the Permitted Exceptions,
          shall not be objections to title if properly executed instruments
          necessary to satisfy the same are delivered to the Purchaser's
          title company (the "Title Company") at or before the Closing,
          together with recording and filing fees, if any, so that the
          Title Company may omit such taxes, liens, or encumbrances from
          its schedule of exceptions to title.

       b.   If, after the period and undertakings specified in Section
          7(a) above, Seller is unable to convey title to the Property on
          the Closing Date in accordance with the provisions of this
          Agreement (i.e., subject only to the Permitted Exceptions), then
          at any time thereafter on or before the Closing Date, Purchaser
          may elect to take such title as Seller can convey or transfer and
          to deduct from the Purchase Price (i) liens, charges, claims and
          encumbrances of a definite of ascertainable amount, and (ii) the
          cost of any deletions and changes and any additional title
          endorsements provided by the Purchaser's title insurance company.
          If Purchaser shall not so elect, Purchaser may elect to terminate
          this Agreement, such termination to be effective immediately upon
          giving written notice of same to Seller.  Upon such termination,
          the Purchaser shall be entitled to receive the Deposit, plus
          accrued interest earned thereon, from the Escrow Agent and this
          Agreement shall be null and void and the parties hereto shall be
          relieved of all further obligations and liability except as
          otherwise provided herein.

       c.   Purchaser, at Purchaser's expense, shall promptly order and
          furnish to Seller, a survey by a licensed surveyor, acceptable to
          Purchaser and the Title Company, of the Property which shall
          describe the Property, be dated after the date hereof, and
          contain a surveyor's certificate in favor of Purchaser and the
          Title Company in form satisfactory for, among other things,
          deletion of the standard survey exception from the title
          insurance policy and consistent with and as required by the next
          succeeding sentence.  The survey will show (i) the location of
          the perimeter of the land by courses and distances and its square
          footage, (ii) the location of all improvements and  the
          relationship thereof by distances to the perimeter of the land,
          the building lines, and the street lines, (iii) any easements and
          rights-of-way, (iv) any building lines, (v) the lines of the
          streets abutting the land and the width thereof, (vi) any
          encroachments and the extent thereof in feet and inches upon the
          land, and (vii) any encumbrances of a physical nature (the
          "Survey").  Following receipt of the Survey, Purchaser shall have
          the same rights to object to facts shown on such survey, and
          Seller shall have the same obligations to cure said objections,
          as each party has with respect to defects in title as set forth
          in Paragraph 7(a) and (b) hereof.

       d.   The existence of any mortgage, other lien or encumbrance
          which Seller is obligated or otherwise agrees to discharge, shall
          not be an objection to title, provided that (x) instruments for
          the discharge of same are in compliance with Paragraph 7(f)
          below, together with recording and/or filing fees, and (y) the
          payment of said lien is deducted from the balance of Purchase
          Price paid on the Closing Date.  Unpaid liens for taxes, water
          charges and assessments shall not be objections to title, but the
          amount thereof, plus interest and penalties thereon, shall be
          deducted from the Purchase Price, and allowed to Purchaser,
          subject to the provisions for apportionment of such charges
          contained herein.

       e.   If, on the Closing Date, the Property or any part thereof
          shall be or shall have been affected by assessments which are, or
          which may become, payable in annual installments, of which the
          first installment is then a charge or lien, or has been paid,
          then for the purposes of this Agreement all of the unpaid
          installments of any such assessments which are, or which may
          become, payable in annual installments, of which the first
          installment is then a charge or lien, or has been paid, then for
          the purposes of this Agreement all of the unpaid installments of
          any such assessments, including those which are to become due and
          payable after the Closing Date, shall be deemed to be due and
          payable and shall be deemed liens upon the Property, and shall be
          prorated on the Closing Date.

       f.   Seller agrees to execute and deliver to the Title Company
          any instrument or deposit, including any consents, indemnities or
          affidavits, required of Seller to remove or discharge an
          objection to title or defect in marketability or to indicate the
          terms and reduced amount of any mortgage or other lien on the
          Property.  Such deliveries shall be in such form, terms,
          conditions and amount and be made in such manner as may be
          required by the Title Company to insure title and to satisfy said
          company sufficiently for them to either certify the said facts
          and/or omit any exception to title and/or guarantee to Purchaser
          against collection of any item out of the Property.  Said
          instrument shall also be satisfactory in form to any mortgage
          lender procured by Purchaser.

     8.   APPORTIONMENTS.  As Seller will be simultaneously entering
into  the Lease on the Closing Date that provides for payment  by
Seller, as Tenant, of all expenses in connection with the use and
occupancy  of  the  Premises, there will  be  no  adjustments  at
Closing  for real estate taxes, water charges, sewer  rents,  and
fuel.  The only adjustments which may be due at Closing  are  for
sums  which are required to be paid by either party to the  other
at  the Closing pursuant to the provisions of this Agreement.  In
addition,  Seller  shall continue to pay all utilities  servicing
the  Property  so  required to obtain  final  readings  for  such
utilities.

     9.   EXISITING LEASES.  The parties acknowledge that Seller is
the current and sole occupant of the Property and that Seller has
no  lease,  license  or occupancy agreement  for  said  Property.
Seller shall not be permitted to amend, modify or renew any lease
of  all  or  any portion of the Property and enter into  any  new
lease  for  any portion of the Property that may now or hereafter
become vacant without the written consent of the Purchaser.

           Seller  indemnifies and holds Purchaser harmless  from
and  against  any  and  all  loss, cost,  liability,  damage  and
expense, including reasonable attorneys' fees, arising out  of  a
breach  of  the  foregoing representation.  The  foregoing  shall
survive the Closing Date.

     10.  CERTIORARI.

       a.   Seller represents and Purchaser acknowledges that there is
          currently a certiorari proceeding pending for the reduction of
          the assessed valuation of the Property and Seller instituted said
          proceeding.  If there is a proceeding pending, Seller may not
          settle such proceedings without Purchaser's written consent,
          which shall not be unreasonably withheld.  If there is not a
          proceeding pending, Seller, at Purchaser's request and expense,
          shall institute a tax reduction proceeding for the year in which
          the Closing Date occurs.

       b.   The provisions of this Paragraph 10 shall survive the
          Closing Date.

     11.  CASUALTIES.

       a.   Seller represents, warrants and covenants as of the date
          hereof and the Closing Date that it (x) maintains the insurance
          policy on the Property as more fully detailed on Exhibit "D"
          hereto (the "Insurance Policy") and (y) shall maintain, and pay
          the premiums for, the Insurance Policy for the term of this
          Agreement through the Closing Date.  The provisions of this
          Paragraph 11(a) shall survive the Closing Date.

       b.   If between the date of this Agreement and the Closing Date,
          all or any part of the Property is damaged by fire or other
          casualty, then notwithstanding the provisions of any statute to
          the contrary, Seller shall give Purchaser written notice of any
          fire or casualty occurring prior to the Closing Date within five
          (5) business days after Seller has received actual notice of such
          occurrence.

       c.   If, as a result of such fire or casualty, the estimated cost
          of restoration of the Property is in excess of twenty (20%)
          percent of the Purchase Price, Purchaser shall have the right to
          cancel this Agreement by written notice to the Seller within a
          reasonable amount of time after Purchaser receives the foregoing
          notice.  The cost of restoring the Property, for the purposes of
          this provision, shall be determined by the written estimate of a
          reputable contractor mutually agreeable to Seller and Purchaser
          which estimate shall be conclusive.  In the event of such
          cancellation by the Purchaser, the Deposit, plus accrued interest
          earned thereon, shall be returned to Purchaser, whereupon neither
          party shall have any further liability to the other hereunder.

       d.   If the Property is damaged by fire or other casualty, prior
          to the Closing Date, and the estimated cost of restoring the
          Property is equal to or less than twenty (20%) percent of the
          Purchase Price, or if the cost of restoration is in excess of
          twenty (20%) percent of the Purchase Price and Purchaser does not
          terminate this Agreement pursuant to subparagraph (c) hereof,
          then this Agreement shall remain in full force and effect and
          title shall nevertheless close without any abatement in the
          Purchase Price or any liability or obligation on the part of
          Seller by reason of such damage or destruction except that the
          Purchase Price shall be reduced in an amount equal to the
          deductible on the Insurance Policy; and provided further that on
          the Closing Date, Seller shall execute and deliver to Purchaser
          an assignment of Seller's right to any proceeds of any hazard
          insurance policies covering such damage or destruction.  In
          addition, on the Closing Date, the proceeds (if any) actually
          collected and retained by Seller under the provisions of the
          hazard insurance policies covering the Property, less costs
          actually incurred by Seller in connection therewith, including
          but not limited to reasonable legal fees, shall be transferred to
          Purchaser.

     12.  CONDEMNATION.

       a.   If between the date of this Agreement and the Closing Date,
          all or a substantial part of the Property (or any part of the
          Property that causes the Property to be uneconomical, in
          Purchaser's or Seller's reasonable opinion) is taken in
          condemnation or by eminent domain proceeding, or Seller receives
          a written notice stating that such a proceeding may occur with
          respect to the Property, Purchaser and Seller shall each have the
          option to terminate this Agreement and upon such an election by
          notice to the other party given in accordance with paragraph 21
          herein, and this Agreement shall be deemed terminated and of no
          further force and effect and the Deposit, plus accrued interest
          earned thereon, shall be returned to Purchaser, whereupon neither
          party shall have any further liability to the other hereunder.
          The party making such an election shall make such election within
          a reasonable amount of time after notice of such proceeding.
          Seller must advise Purchaser within three (3) days of any intent
          by any governmental agency's intent to condemn the Property or a
          portion thereof, to exercise eminent domain or of any notice of
          any such or similar proceeding.

       b.   If the neither party exercises the option to terminate this
          Agreement provided in (a) above, there shall be a reduction in
          the balance due on the Closing Date to be paid by Purchaser to
          Seller on the Closing Date by an amount equal to all awards, if
          any, paid to Seller prior to the Closing Date for the taking by
          eminent domain, and Seller shall execute and deliver to Purchaser
          an assignment of Seller's rights to any other proceeds and awards
          for the taking by eminent domain which are made after the Closing
          Date.

     13.  SELLER'S REPRESENTATIONS.

       a.   In addition to the representations contained elsewhere in
          this Agreement, Seller represents that as of the date of this
          Agreement and on the Closing Date that:

             i.   It has the power and authority to enter into this Agreement
               and to consummate the transaction provided for herein; (b) this
               Agreement is a valid and binding agreement of Seller; (c) the
               person executing this Agreement has the authority to do so and
               the power to bind Seller thereby; (d) neither the execution of
               this Agreement nor consummation of the transaction contemplated
               hereunder requires the consent of any other person, firm,
               corporation, court, governmental or quasi-governmental authority
               nor will either such execution or consummation constitute a
               violation or breach by Seller of any agreement to which Seller is
               a party or court order or decree;

             ii.  It has not received any written notice of any condemnation
               or eminent domain proceeding with regard to all or any part of
               the Property;

             iii. No prior tenant or any third party has or had any lease or
               agreement conferring any right or estate in all or any portion of
               the Property including, without limitation, any option or right
               of first refusal to purchase all or any portion of the Property;

             iv.  There are no tenants at the Property other than Seller and
               that no party other than Seller is in possession, or has any
               rights to occupy or possess any portion, of the Property.

             v.   That Seller, as the sole occupant of the Property, has no
               security deposit and has no written lease, occupancy or license
               or other agreement governing Seller's occupancy of the Property.

             vi.  It is not now a party to any litigation with respect to the
               Property and Seller knows of no litigation affecting the Property
               and Seller shall give to Purchaser prompt notice of the
               institution or threat of any such litigation prior to the Closing
               Date;

             vii. It now owns legal and beneficial title to the Property, free
               and clear of all liens and encumbrances, except for the Permitted
               Exceptions;

             viii.     It agrees to not suffer any default in the payment of
               principal or interest or in the maintenance of the Property or
               any other condition which may permit the holder of any mortgage
               encumbering the Property to declare the same due and payable; all
               existing mortgages are non-participating and there has been no
               modifications thereto which have not been exhibited to Purchaser;

             ix.  It has not transferred or agreed to transfer any development
               or air rights pertaining to the Property and has no knowledge of
               such transfer or agreement to do so by any former owner of the
               Property;

             x.   It has not received notice of any mechanic's liens, sidewalk
               assessments, emergency repair liens or notices to repair
               sidewalks; and

             xi.  It is not a "foreign person", as such term is defined in the
               Internal Revenue Code of 1986, as amended (the "Code).

           The  provisions of this Paragraph 13(a) shall  survive
the Closing Date.

       b.   Between the date of this Agreement and the Closing, Seller
          shall continue to operate, maintain and repair the Property in
          its usual and customary manner.

     14.  PURCHASER'S REPRESENTATIONS.  Purchaser represents as of the
date of this Agreement and as of the Closing Date that (a) it has
the  power  and  authority to enter into this  Agreement  and  to
consummate  the  transaction  provided  for  herein;   (b)   this
Agreement is a valid and binding agreement of Purchaser; (c)  the
person  executing this Agreement has the authority to do  so  and
the power to bind Purchaser thereby; (d) neither the execution of
this  Agreement nor consummation of the transaction  contemplated
hereunder  requires  the  consent  of  any  other  person,  firm,
corporation, court, governmental or quasi-governmental  authority
nor  will  either  such  execution or consummation  constitute  a
violation  or  breach  by  Purchaser of any  agreement  to  which
Purchaser is a party or court order or decree.

     15.  CLOSING DATE.  Closing will take place at the offices of
Certilman Balin Adler & Hyman, LLP, the attorneys for Seller,  at
90  Merrick  Avenue, 9th Floor, East Meadow, New York  11554,  at
10:00  a.m.  on  or about May _26, 2005.  The location  of  the
closing  is subject to change in the event Purchaser's  financing
institution so requires.

     16.  DOCUMENT DELIVERY.

       a.   Seller shall, on the Closing Date:

             i.   Deliver to Purchaser or Purchaser's designee a Bargain and
               Sale Deed with covenants, in proper statutory form for recording,
               duly executed and acknowledged, with revenue stamps in proper
               amount affixed thereto by Seller so as to convey to Purchaser fee
               simple title to the Property, free and clear of all liens,
               encumbrances and title defects, except for the Permitted
               Exceptions;

             ii.  Deliver to Purchaser or Purchaser's designee a Certification
               of Non-foreign Status duly executed and containing such other
               information as may be required by Internal Revenue Code Section
               1445 and the regulations issues thereunder.  Anything herein
               contained to the contrary notwithstanding, in the event that
               Seller is a "foreign person" (as defined in Internal Revenue Code
               Section 1445) or in the event that Seller fails or refuses to
               deliver the Certification of Non-foreign Status, as aforesaid, or
               in the event that Purchaser receives notice from any Seller-
               transferor's agent or Purchaser-transferee's agent (each as
               defined in Internal Revenue Code Section 1445 and the regulations
               issued thereunder) that, or Purchaser has actual knowledge that,
               said Certification is false, Purchaser shall deduct and withhold
               from the Purchase Price under this Agreement a tax equal to ten
               percent (10%) thereof, as required by Internal Revenue Code
               Section 1445.  In the event of any withholding, Seller's
               obligation to deliver title hereunder shall not be excused or
               otherwise affected.  Purchaser shall pay over such withheld
               amount to the Internal Revenue Service together with filing such
               form as may be required thereby and Seller, in the event of any
               claimed over-withholding shall be limited solely to an action
               against the Internal Revenue Service for a refund, and hereby
               waives any right of action against Purchaser on account of such
               withholding.  The provisions of this Paragraph 16(ii) shall
               survive the Closing Date;

             iii. Execute and deliver to Purchaser or Purchaser's designee the
               Lease;

             iv.  Deliver to Purchaser or Purchaser's designee a letter
               authorizing the Escrow Agent to disburse the Deposit to Seller;

             v.   Deliver to Purchaser or Purchaser's designee such other
               documents as required by this Agreement and such other documents
               that are reasonably required by Purchaser, Purchaser's lender, if
               any, and the Title Company.

       b.   Purchaser shall, on the Closing Date:

             i.   Deliver the balance of the Purchase Price, subject to
               adjustment as provided in this Agreement, by immediately
               available federal funds transferred by wire to such account(s) in
               such bank(s) as Seller shall designate; or by certified or
               official bank check(s) to Seller and/or its designees, at
               Seller's option;

             ii.  Execute and deliver the Lease;

             iii. Deliver to Seller, a letter authorizing the Escrow Agent to
               disburse the Deposit to Seller;

             iv.  Cause the deed to be recorded, duly complete all required
               real property transfer tax returns and cause all such returns and
               checks in payment of such taxes to be delivered to the
               appropriate officers promptly after the Closing;

             v.   Deliver to Seller such other documents as are required by
               this Agreement to be delivered by Purchaser or as reasonably
               requested by Seller and/or the Title Company in order to
               effectuate the provisions of this Agreement.

     17.  TRANSFER TAXES.

       a.   Seller and Purchaser agree to execute (where applicable) and
          to otherwise cooperate with the other in the preparation and
          filing of any state or local transfer or gains tax or other
          documents or affidavits required to transfer  title  as
          contemplated by this Agreement.

       b.   On the Closing Date, Seller shall pay the New York State
          Real Estate Transfer Tax due and payable in connection with the
          payment by Purchaser of the Purchase Price.  Purchaser shall pay
          the charges necessary to record the deed and for the premium for
          any title insurance desired by Purchaser.

       c.   Seller indemnifies Purchaser against, and holds Purchaser
          harmless from, any claim, judgment, loss, liability, cost of
          expense (including reasonable attorneys' fees and disbursements,
          court costs and litigation expenses) that may be imposed upon,
          incurred by or asserted against Purchaser or the Property by
          reason of Seller's failure to pay any taxes, interest and/or
          penalties required to be paid by Seller in accordance with the
          provisions of this Paragraph 17, however, delivery of the
          transfer taxes to the Title Company shall be deemed full
          compliance by Seller in Seller's obligation to pay such taxes.

       d.   The provisions of this Paragraph 17 shall survive the
          Closing Date.

     18.  ASSIGNMENT.  This Agreement may not be assigned by Seller or
Purchaser  without  the written consent of the  other  except  as
expressly provided in Paragraph 30 hereof.

     19.  RECORDATION.  Seller and Purchaser hereby agree that each
party shall not record this Agreement.

     20.  BROKERAGE.  Purchaser and Seller warrant and represent to
each  other that no broker, person, corporation or entity was  in
any  way  instrumental  or had any part in  bringing  about  this
transaction  other  than Michael Rescigno of  Prudential  Douglas
Elliman  Real  Estate.  Seller shall pay any and all  commissions
due  to  Prudential Douglas Elliman Real Estate.   Purchaser  and
Seller agree that should any claim be made for commissions by any
broker,  person,  corporation or entity other  than  specifically
named in this paragraph, arising by, through or on account of any
act  of  Purchaser or of Purchaser's representatives or of Seller
or  Seller's representatives, respectively, each shall indemnify,
defend  and hold the other harmless from and against all  claims,
liability,  expense  or  damage,  including  without  limitation,
reasonable   attorney's  fees,  in  connection  therewith.    The
provisions of this Paragraph 20 shall not be deemed to be for the
benefit of any third party.  The provisions of this Paragraph  20
shall  survive  the Closing Date or earlier termination  of  this
Agreement.

     21.  NOTICES.  All notices, demands, requests and elections which
are  required  or  desired to be given shall be in  writing,  and
shall  be  sent  by  personal delivery,  facsimile  transmission,
Federal  Express, Express Mail or by the United States Registered
or  Certified  Mail,  Return  Receipt  Requested,  postage  paid,
addressed to Seller at:

                         DIONICS INC.
                         65 Rushmore Street
                         Westbury, New York 11590

     with a copy to:

                         David M. Kaye, Esq.
                         Danzig Kaye Cooper Fiore & Kay, LLP
                         30A Vreeland Road, Suite 230
                         P.O. Box 333
                         Florham Park, New Jersey 07932

                         and

                         Howard M. Stein, Esq.
                         Certilman Balin Adler & Hyman, LLP
                         90 Merrick Avenue - 9th Floor
                         East Meadow, New York 11554

     and to Purchaser at:

                         65 Rushmore Realty LLC
                         32-01 College Point Boulevard
                         Flushing, New York 11354
                         Attn:  Robert Foschi

     with a copy to:

                         Jamie Andrew Schreck, P.C.
                         352 Seventh Avenue, 10th Floor
                         New York, New York 10001

     All notices shall be deemed given on the earlier of the date
of actual receipt or two (2) days after the date of mailing.  Any
notices which either party may be required to give or may  desire
to  give; any consents by either party under this Agreement;  and
any adjournments of the Closing Date may be given or consented to
by  the attorney for such party with the same force and effect as
if given or consented to by such party.  In order to effectuate a
change  of address, the party requesting the change shall send  a
notice to all parties required to receive notice pursuant to this
Paragraph 21.

     22.  TITLES.  The titles herein are inserted only as a matter of
convenience and for reference only and in no way define, limit or
describe  the scope or intent of this Agreement or any provisions
hereof,  nor in any way affect this Agreement and the  terms  and
provisions hereof.

     23.  APPLICABLE LAW.  The laws of the State of New York shall
govern   the  validity,  performance  and  enforcement  of   this
Agreement.

     24.   BINDING  EFFECT.  The submission of this Agreement  to
Purchaser  shall  not  be  construed  as  an  offer,  nor   shall
Purchaser, or any other person, corporation, or other entity have
any rights with respect thereto, unless and until both Seller and
Purchaser  shall  have  executed  this  Agreement,  and  a  fully
executed  copy  is delivered to Purchaser or his attorney.   This
Agreement  shall  be binding upon the parties  hereto  and  their
successors  and  assigns.   The  terms  and  provisions  of  this
Agreement  shall  create  no  right  in  any  person,   firm   or
corporation  other than the parties hereto and  their  respective
successors  and permitted assigns, and no third party shall  have
the right to enforce or benefit from the terms hereof.

     25.  MERGER.  It is understood and agreed that all understandings
and  agreements  heretofore had between the  parties  hereto  are
merged  into  this  Agreement.   This  Agreement  (including  the
Exhibits  attached  hereto) fully and  completely  expresses  the
agreement   of  the  parties  hereto  relating  to  the   matters
referenced  herein, and that the same is entered into after  full
investigation,  neither  party relying upon  any  representation,
express  or  implied warranties, guarantees, promises, statement,
"setups",  representations or information, not embodied  in  this
Agreement, made by the other or by any real estate broker, agent,
employee,  servant or other person representing or purporting  to
represent such party.

     26.  MODIFICATION.  This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder  be
waived,  except by written instrument signed by the party  to  be
charged.

     27.  GENDER.  Whenever the context shall require, the singular
shall  include the plural, the plural shall include the  singular
and  words of any gender shall be deemed to include words of  any
other  gender.   As  used  herein,  Purchaser  shall  mean   each
individual   or   other  entity  signing  this  Agreement,   both
individually and collectively.

     28.  ESCROW PROVISIONS.

       a.   Escrow Agent shall hold the proceeds of the check delivered
          to Escrow Agent for the Deposit, in escrow, in an interest-
          bearing account maintained at Astoria Federal Savings Bank,
          located  at Bayshore, New York;

       b.   The Deposit shall be held by the Escrow Agent until the
          Closing or sooner termination of this Contract and Escrow Agent
          shall pay over the interest or income earned thereon, if any, to
          the party entitled to the Deposit.  The party receiving such
          interest or income shall pay any income taxes due thereon.  If
          for any reason the Closing does not occur pursuant to the
          provisions of this Contract and either party makes a written
          demand upon Escrow Agent, in the manner required for notices, for
          payment of the Deposit, then Escrow Agent shall give written
          notice, in accordance with the provisions of section 21 to the
          other party of such demand. If Escrow Agent does not receive a
          written objection from the other party to the proposed payment of
          the Deposit pursuant to the aforesaid demand within ten (10) days
          after the delivery of such notice by Escrow Agent, Escrow Agent
          is hereby authorized to make such payment in accordance with the
          aforesaid demand. If Escrow Agent receives written objection from
          the other party to the proposed payment of the Deposit pursuant
          to the aforesaid demand within such ten (10) day period or if for
          any other reason Escrow Agent in good faith shall elect not to
          make such payment, Escrow Agent shall continue to hold the
          Deposit until otherwise directed by written instructions from
          Seller and Purchaser or a final judgment of a court of competent
          jurisdiction. Escrow Agent, however, shall have the right at
          anytime to deposit the Deposit with the Clerk of any Court of
          competent jurisdiction in the State of New York, and Escrow Agent
          shall give written notice of such deposit to the Seller and the
          Purchaser, and upon such deposit being made, Escrow Agent shall
          be discharged from all obligations and responsibilities
          hereunder. The parties acknowledge that Escrow Agent is acting
          solely as a stakeholder at their request and for their benefit.

       c.   Seller represents that its Federal Employer Identification
          Number is 11-2166744; and Purchaser represents its Federal
          Employer Identification Number is 20-2027842.
          shall be executed and delivered by Seller and Purchaser on the
          Closing Date.

     29.  REMEDIES/LEGAL FEES/LIQUIDATED DAMAGES.  In the event of
default  by  Seller under the terms of this Agreement,  Purchaser
shall  have  such remedies at law or in equity as  Purchaser  may
elect  including specific performance.   In any action  commenced
by  Purchaser against Seller hereunder, Purchaser may recover its
legal  fees  and  disbursements from Seller.   In  the  event  of
default  by  Purchaser  under the terms of  this  Agreement,  the
damages  due  Seller by reason of such default  shall  be  deemed
liquidated  in the amount of the Deposit provided for  hereunder.
Except  with  respect  to any indemnities made  by  Purchaser  to
Seller hereunder, receipt of the amount of such Deposit shall  be
Seller's  sole  and  complete remedy in the event  of  a  default
hereunder by Purchaser and Seller hereby waives any and all other
remedies.

     30.  MORTGAGE TAX.  Seller agrees that Purchaser may obtain an
assignment of Seller's existing mortgage, if any, for the purpose
of mortgage tax savings provided Seller receives a release of its
liability under the note secured by such mortgage at closing.

      IN  WITNESS  WHEREOF, the undersigned  have  executed  this
Agreement as of the date first set forth above.

                              Seller:

                              DIONICS, INC.

                              By: Bernard Kravitz
                              Title: President

                              Purchaser:

                              65 RUSHMORE REALTY, LLC

                              By:  Robert Foschi
                              Title:    Member<PAGE>
                                                                    Exhibit 10.2

                       LICENSE AND DISTRIBUTION AGREEMENT

THIS LICENSE AND DISTRIBUTION AGREEMENT is entered into as of the 3rd day of
October 2002.

BETWEEN: HYDRO MED SCIENCES, INC., a corporation incorporated under the laws of
         the state of Delaware, U.S.A., with its principal place of business
         located at
         8 Clarke Drive
         Cranbury, New Jersey 08512-3617

         (hereinafter referred to as "HYDROMED")

                                     -and-

         PALADIN LABS INC., a corporation incorporated under the laws of Canada,
         with its principal place of business located at

         6111 Royalmount Avenue
         Suite 102
         Montreal, Quebec, H4P 2T4

         (hereinafter referred to as "PALADIN")

                                   BACKGROUND

WHEREAS Paladin is engaged in the marketing, sale and distribution of various
pharmaceutical products;

WHEREAS HydroMed has developed and is the sole owner or exclusive licensee of
certain Patent Rights and other Intellectual Property (each as hereinafter
defined) relating to a certain Product (as hereinafter defined) and is currently
in the process of conducting clinical trials for the Product for use in the
treatment of prostate cancer;

WHEREAS HydroMed wishes to grant to Paladin an exclusive license under the
Patent Rights and other Intellectual Property during the Term (as hereinafter
defined) to import, use and sell the Product for use in the Primary Indication
and Other Indications (both as hereinafter defined) in the Territory (as
hereinafter defined), the whole in accordance with the terms and conditions
hereinafter set forth;

WHEREAS HydroMed wishes to appoint Paladin as its exclusive agent in the
Territory in seeking to obtain Regulatory Approval (as hereinafter defined) for
the Product in the Territory for use in the Primary Indication and Other
Indications, the whole in accordance with the terms and conditions hereinafter
set forth;

WHEREAS HydroMed wishes to grant to Paladin the exclusive right to market and
sell the Product in the Territory for use in the Approved Indications, the whole
in accordance with the terms and conditions hereinafter set forth;

                                  CONFIDENTIAL
<PAGE>
                                                                               2

WHEREAS HydroMed has agreed to supply Paladin with the Product on an exclusive
basis in the Territory prior to Regulatory Approval, and following receipt of
Regulatory Approval, for distribution and sale in the Territory for use in the
Approved Indications, the whole in accordance with the terms and conditions
hereinafter set forth.

                                      TERMS

NOW THEREFORE this Agreement witnesses that in consideration of the respective
covenants, agreements, representations, warranties and indemnities herein
contained and for other good and valuable consideration, the Parties hereby
covenant and agree as follows:

                    ARTICLE 1 - DEFINITIONS AND INTERPRETATION

1.1  DEFINITIONS.  For the purposes of this Agreement or any notice, consent,
     authorization or other communication required or permitted to be given
     hereunder, the following expressions shall have the following meanings,
     respectively, unless the context otherwise requires:

     (a)  "AFFILIATE" shall mean any Person which directly or indirectly
          controls, is controlled by, or is under common control with another
          Person, provided that "control" shall mean ownership as to more than
          fifty percent (50%) of another Person or the power to direct decisions
          of another Person, including, without limitation, the power to direct
          management and policies of another Person, whether by reason of
          ownership, by contract or otherwise.

     (b)  "AGREEMENT" shall mean this License and Distribution Agreement and all
          instruments supplemental hereto or in amendment or confirmation
          hereof; "HEREIN", "HEREOF, "HERETO", "HEREUNDER" and similar
          expressions mean and refer to this Agreement and not to any particular
          Article, Section, Subsection or other subdivision; "ARTICLE",
          "SECTION", "SUBSECTION" or other subdivision of this Agreement means
          and refers to the specified Article, Section, Subsection or other
          subdivision of this Agreement.

     (c)  "APPROVED INDICATIONS" shall mean the Primary Indication and the Other
          Indications, in each case at such time as Regulatory Approval for such
          indication has been obtained.

     (d)  "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
          other day on which the branches of the Canadian Imperial Bank of
          Commerce located in the City of Montreal, Quebec and/or the Federal
          Reserve Bank with jurisdiction over the then- current principal place
          of business by HydroMed are not open for business.

     (e)  "CALENDAR QUARTER" shall mean each three-month period commencing
          January 1, April 1, July 1 and October 1 of each year during the term
          of this Agreement.

     (f)  "CALENDAR YEAR" shall mean the period from January 1st to December
          31st in a given year.

     (g)  "CANADIAN SOURCED ITEMS" means betadine swabsticks, alcohol swabs and
          Lidocaine HC1 1% and Epinephrine.

                                  CONFIDENTIAL
<PAGE>
                                                                               3

     (h)  "CMC INFORMATION" shall mean the chemistry, manufacturing, and control
          information as commonly found in a NDS.

     (i)  "COMMERCIAL SALE" means any sale or distribution of the Product by
          Paladin or its Affiliates to a Third Party, other than (i)
          distribution in connection with Phase IV clinical trials of the
          Product conducted by Paladin or (ii) distribution of samples in
          accordance with Section 4.7 provided by HydroMed under Section 4.7 at
          cost or less.

     (j)  "DEVELOPMENT PLAN" shall have the meaning set forth in Section 3.3.

     (k)  "DIN" shall mean the Drug Identification Number issued by the TPD for
          each dosage form of the Product sold in the Territory.

     (1)  "DEVELOPMENT PARTNER" shall have the meaning set forth in Subsection
          3.9.1.

     (m)  "DOLLAR" and the symbol "$" shall mean lawful money of the United
          States.

     (n)  "EFFECTIVE DATE" shall mean the date first written above.

     (o)  "ENDOMETRIOSIS INDICATION" shall have the meaning set forth in
          Subsection 3.9.1.

     (p)  "EVENT OF FORCE MAJEURE" shall have the meaning set forth in Section
          13.1.

     (q)  "GMPs" shall mean Good Manufacturing Practices as required under the
          rules and regulations of Health Canada.

     (r)  "GOVERNMENTAL BODY" shall mean (i) any domestic or foreign national,
          federal, provincial, state, municipal or other government or body,
          (ii) any subdivision, ministry, department, secretariat, bureau,
          agency, commission, board, instrumentality or authority of any of the
          foregoing governments or bodies, (iii) any quasi-governmental or
          private body exercising any regulatory, expropriation or taxing
          authority under or for the account of any of the foregoing governments
          or bodies, or (iv) any domestic or foreign judicial, quasi-judicial,
          arbitration or administrative court, grand jury, tribunal, commission,
          board or panel of any of the foregoing governments or bodies.

     (s)  "IMPLANT" means HydroMed's proprietary Histrelin Hydron Implant(TM),
          as more fully described in Schedule 1.1 (s).

     (t)  "IMPROVEMENTS" shall mean any re-formulations, line-extensions or
          other advances in, modifications or improvements to the Product for
          use in the Primary Indication and Other Indications.

     (u)  "INTELLECTUAL PROPERTY" shall mean: (a) the Patent Rights; (b) the
          Trade Marks; (c) the Marketing and Distribution Know-How; and (d)
          whether or not reduced to writing, all discoveries, inventions, all
          rights to inventions, designs, design applications and design
          registrations, copyright, copyright applications and registrations,
          and all other rights and intellectual property now or hereafter owned,
          held or used by HydroMed or any of its Affiliates, other than patents,
          patent applications, trademarks, trade names and trade dress.

                                  CONFIDENTIAL
<PAGE>
                                                                               4

     (v)  "KIT" shall mean a container and its components assembled and packaged
          by HydroMed or a third party designated by HydroMed, containing the
          Implant and the materials and accessories listed on Schedule 1.1 (v)
          The contents of the Kit may vary from time to time, subject to mutual
          written agreement between the Parties.

     (w)  "LABELS" shall mean (i) all labels and other written, printed, or
          graphic matter upon the Product or any packaging, container or wrapper
          utilized with the Product and (ii) any written material accompanying
          the Product, including without limitation, any package inserts.

     (x)  "LAWS" shall mean:

          (i)  all constitutions, treaties, laws, statutes, codes, ordinances,
               orders, decrees, rules, regulations, and municipal by-laws,
               whether domestic, foreign or international, including any such
               constitutions, etc. of any Governmental Body;

          (ii) all judgments, orders, writs, injunctions, decisions, rulings,
               decrees and awards of any Governmental Body; and

          (iii) all policies, practices and guidelines of any Governmental Body,
               in each case binding on or affecting the Party or Person referred
               to in the context in which such word is used; and "LAW" shall
               mean any one of them.

     (y)  "LOSSES" shall mean liabilities, damages, costs or expenses, including
          reasonable fees and expenses of attorneys and other professionals, as
          well as court costs.

     (z)  "MARKETING AND DISTRIBUTION KNOW-HOW" shall mean all know-how,
          information, data, knowledge, reference materials, confidential
          information and other information owned or developed by, in the
          possession of, known to or used by HydroMed and/or its Affiliates that
          is reasonably required by Paladin in order to market, distribute, use
          and sell the Product in the Territory for use in the Primary
          Indication and Other Indications and can be disclosed by HydroMed to
          Paladin. Without limiting the generality of the foregoing, Marketing
          and Distribution Know-How shall include all marketing plans, market
          research data and reports, customer segmentation reports, studies,
          sales materials, reprints, brochures, package inserts, stability data
          and manufacturing quality data regarding the Product whether in the
          Territory or outside the Territory, and all Promotional Materials, in
          each case if HydroMed can disclose it to Paladin.

     (aa) "MARKETING PLAN" shall have the meaning set forth in Section 4.9.

     (bb) "MATERIAL BREACH" shall mean any breach of the terms of this Agreement
          of such a nature as to have a material effect on the non-breaching
          Party.

     (cc) "NDS" shall mean a New Drug Submission filed with the TPD.

     (dd) "NET SALES" shall mean the total gross sales invoiced and collected by
          Paladin with respect to the Commercial Sale of the Product in the
          Territory by Paladin, less the

                                  CONFIDENTIAL
<PAGE>
                                                                               5

          aggregate of (i) customers' returns for Product that fails to comply
          with Specifications or that are made in accordance with the Returns
          Policy attached to Schedule 8.8, rebates pursuant to any governmental
          programs or Laws, recalls, trade and/or promotional allowances
          actually allowed or taken; (ii) charges paid by Paladin for freight,
          transport and delivery, including insurance, for shipping from
          Paladin's or its designee's facilities to a customer, and (iii) any
          sales tax, value added tax, goods and services tax or any other tax
          that may be imposed on the sale of the Product, which taxes are
          included in gross sales invoiced.

     (ee) "OTHER INDICATIONS" shall mean the treatment of central precocious
          puberty (CPP), and/or any other indications for which the Product
          shall be developed; provided, however, that the Endometriosis
          Indication shall only be treated as an Other Indication if Paladin
          exercises its right of first refusal to obtain marketing and
          distribution rights for the Endometriosis Indication in accordance
          with Subsection 3.9.

     (ff) "PARTIES" shall mean Paladin or HydroMed collectively; and "Party"
          shall mean either one of them.

     (gg) "PATENT RIGHTS" shall mean those patent applications and issued
          patents owned by HydroMed or its Affiliates and/or made available in
          any other way to HydroMed or its Affiliates that but for this
          Agreement would be infringed by the manufacture, use, distribution or
          sale of the Product in the Territory for use in the Primary Indication
          or Other Indications and every divisional, continuation, continuation
          in part, substitution and confirmation application based thereon, and
          any reissue or extension based on any of the foregoing.

     (hh) "PERSON" shall mean an individual, corporation, limited liability
          company, cooperative, partnership, organisation or any similar entity.

     (ii) "PRIMARY INDICATION" shall mean the treatment of prostate cancer.

     (jj) "PRODUCT" shall mean all dosage strengths and forms of the Implant in
          its final finished form along with the Kit, together with all Labels
          and any and all Improvements. In no event shall the Canadian Sourced
          Items be considered part of the Product.

     (kk) "PROMOTIONAL MATERIALS" shall mean all promotional materials, detail
          aids and pieces, journal ads, films, artwork and graphics, and any
          other marketing literature and information relating to the marketing,
          distribution or sale of the Product for use in the Primary Indication
          and/or Other Indications outside of the Territory.

     (l1) "REGULATORY APPROVAL" shall mean the approval by the TPD of an NDS and
          the issuance of a DIN for the Product, and any other approvals,
          licenses, registrations or authorizations of the TPD or any other
          Regulatory Authority necessary for the marketing, distribution and
          sale of the Product in the Territory for use in a particular
          indication.

                                  CONFIDENTIAL
<PAGE>
                                                                               6

     (mm) "REGULATORY AUTHORITY" shall mean each and every Governmental Body
          from which approvals are required for the marketing, distribution or
          sale of the Product in the Territory.

     (nn) "REJECTED PRODUCT" shall have the meaning set forth in Section 7.6.1.

     (oo) "SPECIFICATIONS" shall mean the specifications for the Product, as
          approved by the TPD, to be attached as Schedule l.l(oo) and more fully
          described in the official Labels for the Product.

     (pp) "TERM" shall mean the time period from the Effective Date until
          termination of this Agreement.

     (qq) "TERRITORY" shall mean Canada and each of its territories and
          possessions on the Effective Date.

     (rr) "THIRD PARTY" means any Person other than a Party or an Affiliate of a
          Party.

     (ss) "TPD" shall mean the Therapeutic Products Directorate of Health Canada
          or any successor or replacement entity thereof performing the same
          functions.

     (tt) "TRADE MARKS" shall mean, subject to Article 5, all trade marks and
          trade names and trade dresses (whether registered or not) owned by
          HydroMed or its Affiliates and approved by HydroMed for use in the
          marketing, distribution and sale of the Product in the Territory for
          use in the Primary Indication and/or Other Indications.

1.2  INTERPRETATION.  The division of this Agreement into Articles and the
     insertion of headings are for convenience of reference only and shall not
     affect the interpretation of this Agreement. In this Agreement, words
     importing the singular number only shall include the plural and vice versa
     and words importing gender shall include all genders.

1.3  SCHEDULES.  The following are the Schedules annexed to and incorporated (or
     will be annexed to and incorporated) in this Agreement by reference and
     deemed to be a part hereof:

     Schedule 1.1(s)    Current Implant Specifications
     Schedule l.l(v)    Contents of Kit
     Schedule 1.1(oo)   Product and Kit Specifications
     Schedule 8.8       Returns Policy
     Schedule 9.1       Quality Agreement

                      ARTICLE 2 - LICENSE AND CONSIDERATION

2.1  LICENSE GRANTS.  HydroMed hereby grants to Paladin, and Paladin hereby
     accepts, an exclusive royalty-bearing (as set forth in Article 6) license
     under the Intellectual Property in the Territory during the Term (and any
     extended period provided for in Section 13.7):

     2.1.1. to seek Regulatory Approval for the marketing, distribution and sale
          of the Product for use in the Primary Indication, and subject to
          Sections 3.1 and 3.9, any Other Indications;

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                                                                               7

     2.1.2. following receipt of Regulatory Approval, to directly or indirectly
          use, market, promote, distribute and sell the Product in the Territory
          for use in the Approved Indications;

     2.1.3. subject to Article 5, to use the Trade Marks on the Product in
          connection with the marketing, distribution and sale of the Product in
          the Territory for use in the Approved Indications; and

     2.1.4. to use the Marketing and Distribution Know-How, the Patent Rights
          and all other Intellectual Property to the extent reasonably required
          by Paladin in order to market, distribute and sell the Product in the
          Territory for use in the Approved Indications,

     the whole in accordance with the provisions of this Agreement. Paladin
     agrees that all of the Intellectual Property is and shall remain the
     property of HydroMed.

2.2  SUBLICENSING.  The license rights granted under Section 2.1 may be
     sublicensed by Paladin with the prior written consent of HydroMed, which
     consent shall not be unreasonably withheld or delayed. The grant of any
     sublicense shall not relieve Paladin of any of its obligations under this
     Agreement.

2.3  RESERVATION OF RIGHTS.  HydroMed hereby reserves to itself all right, title
     and interest in the Intellectual Property not expressly granted to Paladin
     in this Agreement. Without limiting the generality of the foregoing, in no
     event shall this Agreement be construed to grant Paladin any rights to the
     Intellectual Property outside the Territory or prevent HydroMed from
     directly or indirectly: (a) manufacturing, using, marketing, promoting,
     distributing and selling the Product in the Territory for use in
     indications other than the Primary Indication and Other Indications; (b)
     manufacturing, using, marketing, promoting, distributing and selling the
     Product outside the Territory for use in any indication; or (c) entering
     into and performing agreements with third parties regarding the foregoing.

             ARTICLE 3 - PRODUCT DEVELOPMENT AND REGULATORY APPROVAL

3.1  REGULATORY APPROVAL.  HydroMed hereby appoints Paladin as its exclusive
     agent in the Territory during the Term, and Paladin hereby accepts its
     appointment, upon the terms and conditions herein specified, to apply for
     each Regulatory Approval for the Product for use in the Primary Indication
     and any Other Indications currently in development by HydroMed or developed
     by HydroMed subsequent to the Effective Date; it being understood that
     HydroMed shall be under no obligation to develop the Product for use in
     such Other Indications. Paladin hereby agrees to use commercially
     reasonable efforts in applying for each such Regulatory Approval, which
     shall, whenever permitted by the Law, be applied for in the name of Paladin
     and, subject to Section 13.7, shall be owned solely by Paladin and HydroMed
     undertakes, at its own expense, to provide Paladin with such assistance and
     cooperation to the extent necessary to obtain each such Regulatory Approval
     for the Product for use in the Primary Indication and Other Indications
     currently in development by HydroMed or developed by HyroMed subsequent to
     the Effective Date. The Parties agree to set up a meeting with the TPD
     prior to submitting the NDS for the Product and to undertake appropriate
     follow-up procedures in order to increase the chances of success in
     obtaining Regulatory Approval for the Product for use in the Primary
     Indication.

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3.2  FURNISHING DATA.  HydroMed shall supply Paladin with all data and
     information in its possession or control as is necessary for the purpose of
     obtaining Regulatory Approval for the Product in the Territory for use in
     the Primary Indication and any Other Indications currently in development
     by HydroMed or developed by HydroMed subsequent to the Effective Date,
     including but not limited to clinical and non-clinical study data, results
     and reports (including toxicology reports) and/or CMC information owned or
     used by HydroMed with respect to the Product, and HydroMed may, in its
     discretion, make its personnel available as needed to address any
     regulatory issues as they arise. Without limiting the generality of the
     foregoing, HydroMed shall provide Paladin with access to and the right to
     cross-reference existing regulatory filings for the Product submitted by it
     and/or its Affiliates or designated nominees in any jurisdiction outside of
     the Territory. At the request of Paladin, HydroMed shall notify the
     Regulatory Authority in the Territory of Paladin's right to reference any
     such regulatory filings in any application filed by Paladin in accordance
     with the terms of this Agreement.

3.3  DEVELOPMENT AND REGULATORY APPROVAL PLAN FOR THE PRIMARY INDICATION.
     Within sixty (60) Business Days after the Effective Date, Paladin and
     HydroMed shall prepare a plan outlining all pre-clinical, clinical and
     regulatory activities that are necessary for receiving Regulatory Approval
     for the use of the Product in the Primary Indication in the Territory, the
     party responsible for each such activity and estimated time schedules for
     the completion of all such activities (the "Plan"). Generally, the Plan
     shall allocate responsibility for pre-clinical and clinical activities to
     HydroMed and regulatory activities in the Territory (including development
     and approval of the Labels) to Paladin. Subject to Section 6.3, in no
     event, however, shall the Plan require HydroMed to conduct pre-clinical or
     clinical activities beyond those activities currently being conducted by
     HydroMed in the United States in respect of the Primary Indication. Each
     Party shall use commercially reasonable efforts to perform their respective
     responsibilities under the Plan within the schedule set forth in the Plan.
     Each Party shall provide the other Party with regular (but no less than
     quarterly) updates on its progress against the Plan.

3.4  CLINICAL TRIALS FOR THE PRIMARY INDICATION: PHASE IV CLINICAL STUDIES.
     HydroMed, at its own cost, shall use commercially reasonable efforts to
     complete all necessary pre-clinical and clinical trials that are required
     by the TPD in order to receive Regulatory Approval for use of the Product
     in the Primary Indication, provided that HydroMed shall not be required to
     undertake any pre-clinical or clinical trials for the Primary Indication
     beyond those activities currently being conducted in the United States and
     Canada in respect of the Primary Indication (which includes one (1) site in
     the Territory for the current clinical trial being conducted by HydroMed in
     respect of the Primary Indication). Paladin shall have the exclusive right
     (but not the obligation) to conduct Phase IV clinical trials relating to
     the use of the Product in the Approved Indications in the Territory, but
     only with the prior written consent of HydroMed, which consent shall not be
     unreasonably withheld or delayed; provided that if Paladin fails to conduct
     such Phase IV clinical trial within one (1) year after a request by
     HydroMed to conduct such a study, HydroMed shall have the right to conduct
     Phase IV clinical trials relating to use of the Product in the Approved
     Indications in the Territory. For the purpose of conducting such Phase IV
     clinical trials, HydroMed shall supply to Paladin a commercially reasonable
     quantity of the Product at a price equal to HydroMed's manufacturing cost.
     All clinical and/or marketing data developed by the Parties during the Term
     shall remain the property of the Party developing such data, and any data
     to which both Parties have contributed to or on which both Parties have
     worked shall remain the

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     property of both jointly and severally. The Parties agree that they will
     promptly share with one another all information and reports regarding the
     results of any such Phase IV trials.

3.5  MAINTAINING REGULATORY APPROVAL.  Paladin undertakes to use commercially
     reasonable efforts to maintain the Regulatory Approval for the Product for
     use in the Approved Indications in the Territory. HydroMed undertakes to
     assist in maintaining such Regulatory Approval, in accordance with
     Paladin's reasonable requests. Subject to the foregoing, all reasonable
     direct out-of-pocket expenses incurred by Paladin and/or HydroMed in
     maintaining the registrations shall be borne and reimbursed by Paladin.

3.6  COPIES OF CORRESPONDENCE; NOTICE.  Copies of all pertinent correspondence
     related to the promotion, sale and use of the Product for use in the
     Approved Indications, to and from the TPD or other relevant Regulatory
     Authority and all submissions, or pertinent excerpts thereof, to the TPD
     connected to the Product for use in the Approved Indications will be
     furnished by the corresponding Party to the other Party in a timely manner.

3.7  REIMBURSEMENT.  Paladin shall use commercially reasonable efforts to seek
     to obtain and to maintain the Product on the federal and/or provincial
     formularies for use in the Approved Indications in the Territory. HydroMed
     agrees to assist Paladin as reasonably required with such efforts. Subject
     to the foregoing, any and all expenses incurred by Paladin and/or HydroMed
     with the obtaining and maintenance of the Product on the federal and/or
     provincial formularies shall be borne and reimbursed by Paladin.

3.8  PATENTED MEDICINE PRICES REVIEW BOARD.  Paladin undertakes, at its own
     expense, to make all submissions and filings to the Patented Medicine
     Prices Review Board ("PMPRB") in order to establish unit prices for the
     Product for use in the Approved Indications that conform to the PMPRB's
     guidelines.

3.9  ENDOMETRIOSIS INDICATION.

     3.9.1. DEVELOPMENT.  In the event that HydroMed enters into an agreement
          (the "Third Party Development Agreement") with a Third Party outside
          of the Territory (the "Development Partner") for the development of
          the Product for use in the treatment of endometriosis (the
          "Endometriosis Indication"), then Paladin shall have an option,
          exercisable within a period of thirty (30) days of being notified in
          writing by HydroMed, to pay to HydroMed a share of the total
          consideration paid by the Development Partner under the Third Party
          Development Agreement, as per the following formula: A x B / C, where
          "A" is the total consideration paid by the Development Partner to
          HydroMed for the right to develop the Product for the Endometriosis
          Indication, "B" is the total annual revenue generated by all
          pharmaceutical sales in the Territory, as determined by an independent
          and credible source, and "C" is the total annual revenue generated by
          all pharmaceutical sales for those territories for which the
          Development Partner has been granted marketing rights, as determined
          by an independent and credible source. Any payments made by Paladin
          shall be consistent with the form, terms and conditions of the Third
          Party Development Agreement. If Paladin exercises this option, then
          the Endometriosis Indication shall automatically be treated as an
          Other Indication and be subject to the terms and conditions herein. If
          Paladin does not exercise its option under this subsection 3.9.1 by
          the end of the thirty (30) day period, then HydroMed shall be free

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          to grant, sell, transfer, license or otherwise assign such rights to
          any Third Party, on economic terms no more favourable, in the
          aggregate, to such Third Party than those offered to Paladin
          hereunder.

     3.9.2. RIGHT OF FIRST REFUSAL.  Notwithstanding anything contained herein
          to the contrary, at any time during the Term, in the event that
          HydroMed develops independently the Product for use in the
          Endometriosis Indication, HydroMed shall promptly so notify Paladin in
          writing. Upon receipt of such notice, Paladin shall have a period of
          thirty (30) days to deliver to HydroMed a written notice of its
          interest in marketing and distributing the Product for use in the
          Endometriosis Indication in the Territory. If Paladin so confirms its
          interest, then the Endometriosis Indication shall automatically be
          treated as an Other Indication under this Agreement for all purposes,
          and to the same extent as any of the Other Indications, unless
          otherwise agreed to between the Parties by way of a separate written
          agreement (it being understood that Paladin shall in no event be
          required to pay any milestone payments provided for herein for the
          grant of such rights). If Paladin does not confirm its interest by the
          end of such thirty (30) day period, then HydroMed shall be free to
          grant, sell, transfer, license or otherwise assign or commercialize
          the Product for use in the Endometriosis Indication either itself or
          through Third Parties on economic terms no more favourable in the
          aggregate to such Third Party than those offered to Paladin hereunder.

     3.9.3. ACCESS TO DATA.  If Paladin obtains marketing and distribution
          rights for the Endometriosis Indication as provided in Subsections
          3.9.1 and 3.9.2 above, then HydroMed shall, and shall cause the
          Development Partner to, comply with the terms of this Article 3,
          including without limitation, the undertaking to provide all necessary
          data and information in their possession or control as is necessary
          for the purpose of seeking Regulatory Approval for the Endometriosis
          Indication.

3.10 DEVELOPMENT AND REGULATORY APPROVAL PLAN FOR OTHER INDICATIONS.  Within
     sixty (60) Business Days after HydroMed notifies Paladin of its development
     of the Product for use in an Other Indication, Paladin and HydroMed shall
     prepare a plan outlining all pre-clinical, clinical and regulatory
     activities that are necessary for receiving Regulatory Approval for use of
     the Product in the Other Indication in the Territory, the party responsible
     for each such activity and estimated time schedules for the completion of
     all such activities (each such plan, the "Additional Plan"). Generally,
     each Additional Plan shall allocate responsibility for pre-clinical and
     clinical activities to HydroMed and regulatory activities in the Territory
     to Paladin (including development and approval of the Labels). Subject to
     Section 6.3, in no event, however, shall any Additional Plan require
     HydroMed to conduct pre-clinical or clinical activities beyond those
     activities planned to be undertaken by HydroMed for obtaining approval to
     market and sell the Product in the United States for use in the Other
     Indication, except that HydroMed shall open at least one (1) site in the
     Territory for all pivotal clinical trials for any such Other Indication.
     Each Party shall use commercially reasonable efforts to perform their
     respective responsibilities under each Additional Plan within the schedule
     set forth in each Additional Plan. Each Party shall provide the other Party
     with regular (but no less than quarterly) updates on its progress against
     the Plan.

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       ARTICLE 4 - EXCLUSIVE SUPPLY AND DISTRIBUTION; PROMOTION AND SALES

4.1  APPOINTMENT OF DISTRIBUTOR.  Without prejudice to the exclusive rights
     granted to Paladin in Section 2.1 above and for greater certainty, for the
     Term, HydroMed hereby appoints Paladin, and Paladin hereby accepts its
     appointment, as exclusive distributor of the Product in the Territory for
     the Approved Indications, and HydroMed hereby agrees and undertakes to
     supply Paladin with a sufficient quantity of the Product to meet its needs
     throughout the Term, subject to and in accordance with the terms and
     conditions hereinafter set forth.

4.2  EXCLUSIVE SUPPLY.  During the Term, HydroMed shall not supply the Product
     for distribution or sale in the Territory for use in the Primary Indication
     or Other Indications to any Person other than Paladin, it being understood
     between the Parties that HydroMed shall not directly or indirectly sell, or
     otherwise make available, the Product in the Territory for use in the
     Primary Indication or Other Indications other than through Paladin in
     accordance with the terms of this Agreement. HydroMed shall refer to
     Paladin all orders or inquiries received by it from sources in the
     Territory in connection with the Product for use in the Approved
     Indications.

4.3  SALES WITHIN THE TERRITORY.  Paladin shall not, and Paladin shall cause its
     Affiliates not to, directly or indirectly, without the prior written
     consent of HydroMed, sell the Product outside the Territory, or knowingly
     sell the Product to any Person within the Territory for resale or use
     outside of the Territory.

4.4  COMPETING PRODUCT.  Each Party shall not, and shall cause its Affiliates
     not to, directly or indirectly, jointly or in conjunction with any other
     Person, whether as principal, agent, shareholder, employee, independent
     contractor, or in any other manner whatsoever, develop, market, distribute
     or sell in the Territory any products that contain the same active
     ingredient as that which is contained in the Product, or any products
     similar to or competitive with the Product, that are used in any of the
     Approved Indications, during the Term and for a period of three (3) years
     following the expiry or termination of this Agreement. The foregoing shall
     not be construed to prevent HydroMed from directly or indirectly
     manufacturing, marketing, distributing and selling the Product in the
     Territory for use in any indication after the Term.

4.5  SUBCONTRACTING.  The Parties acknowledge and agree that, subject to prior
     written notification to and acceptance from the appropriate Regulatory
     Authority, each Party shall have the right, at its sole expense, to
     subcontract with Third Parties or Affiliates for the performance of its
     obligations hereunder, upon prior written approval of the other Party where
     the subcontractor is a Third Party (which approval shall not be
     unreasonably withheld or delayed); provided, however, that each Party shall
     remain responsible to the other Party for (a) assuring that each
     subcontractor complies with all applicable provisions of this Agreement and
     all applicable Laws and (b) fulfilling all of its obligations hereunder. In
     the event that any subcontracting by HydroMed would have a material impact
     on Paladin's responsibilities to the appropriate Regulatory Authority and
     to the extent reasonably possible, HydroMed will inform Paladin at least
     six (6) months prior to arranging for any such subcontracting.

4.6  PRODUCT PROMOTION.  Paladin shall employ commercially reasonable efforts to
     market, distribute and sell the Product in the Territory for use in the
     Approved Indications and shall bear all costs and expenses incurred in
     connection with such efforts, except as set forth in this

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     Agreement. The Parties agree to meet at either Party's request in order to
     discuss any marketing, distribution and sales issues.

4.7  SAMPLES.  During the first three (3) years from the date the Product is
     launched in the Territory, HydroMed shall provide to Paladin samples of the
     Product at a price equal to HydroMed's manufacturing cost. Sample
     quantities shall be limited to supplying evaluation units to an advisory
     board for example, or key physicians as identified by Paladin and approved
     by HydroMed acting reasonably, and not to be used as a promotional tool for
     the broad mass of the Territory's physicians.

4.8  PROMOTIONAL MATERIALS.  HydroMed shall provide Paladin, at no additional
     cost, with samples of all Promotional Materials owned by HydroMed to market
     the Product for use in the Approved Indications outside of the Territory;
     provided that Paladin reimburses HydroMed for all additional advertising
     agency costs, if any, associated with supplying any artwork and graphics.
     HydroMed hereby grants to Paladin the right to use such Promotional
     Materials and, subject to Article 5, to modify any artwork and graphics for
     its purpose. HydroMed shall use commercially reasonable efforts to obtain
     for Paladin the right to use Promotional Materials owned by any Third
     Party.

4.9  MARKETING PLAN.  Commencing the year following submission of the NDS,
     Paladin shall prepare, develop and submit to HydroMed an annual marketing
     plan (the "Marketing Plan") for HydroMed's review and approval by no later
     than the 15th of February of each year during the term of this Agreement,
     for the then current Calendar Year. The Marketing Plan will outline plans
     for the promotion and sale of the Product in the Territory, and will also
     include recommendations for Product pricing, reimbursement status and
     activities, positioning, and a description of the promotional programs, if
     any, planned for the relevant Calendar Year. HydroMed, acting in good
     faith, shall have thirty (30) Business Days from the date of receipt to
     review the Marketing Plan and suggest commercially reasonable changes.
     Paladin shall make commercially reasonable efforts to include any changes
     in the Marketing Plan suggested by HydroMed and shall advise, in writing,
     within fifteen (15) Business Days which changes it has incorporated
     together with an explanation as to any changes that were suggested by
     HydroMed but not incorporated. In the event that HydroMed does not respond
     to Paladin within thirty (30) Business Days of the receipt of the Marketing
     Plan, the Marketing Plan will be deemed to be acceptable to HydroMed.
     Notwithstanding anything else contained herein to the contrary, at the
     request of either Party, the Parties shall meet semi-annually to review
     proposed marketing plans for the Product.

                        ARTICLE 5 - BRANDING; TRADEMARKS

5.1  BRANDING.  The Product shall bear a product name owned by HydroMed, which
     product name shall, if possible, be the same as the product name used in
     the United States, as well as certain other trademarks of HydroMed and
     trademarks of Paladin (other than a product name) and use the trade dress
     identified by HydroMed from time to time and approved by Paladin; provided,
     however, that such labeling shall ensure that the distinctiveness of the
     trademarks of each party is maintained and include a tag line that
     indicates the ownership of each Party's trademarks.

5.2  OBLIGATIONS AND CONDITIONS.  No Promotional Materials bearing the Trade
     Marks may be used without HydroMed's prior written approval, which consent
     shall not be unreasonably

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     withheld or delayed but shall be conditioned upon maintaining the
     distinctiveness of the trademarks of each Party and including a tag line
     that indicates HydroMed's ownership of the Trade Marks. It is agreed by the
     Parties that in the event that HydroMed does not respond to Paladin's
     submission of the new Promotional Materials or labeling within ten (10)
     Business Days, consent shall be deemed to be granted. Notwithstanding
     anything to the contrary, Paladin's use of the Trade Marks shall be
     conditioned upon Paladin's compliance with HydroMed's then-current quality
     standards, which standards HydroMed may update from time to time by written
     notice to Paladin, it being understood that Paladin may use up any
     packaging, labeling or Promotional Materials that it has at the time of the
     update, either in stock or in process.

5.3  LICENSE GRANT BY PALADIN.  Paladin hereby, for itself and on behalf of its
     Affiliates, grants HydroMed a nonexclusive license to use Paladin's
     trademarks, trade names, logos and trade dress (collectively, the "Paladin
     Trademarks") on labeling of the Product approved by Paladin.
     Notwithstanding anything to the contrary, HydroMed's use of the Paladin
     Trademarks shall be conditioned upon HydroMed's compliance with Paladin's
     then-current quality standards which standards Paladin may update from time
     to time by written notice to HydroMed, it being understood that HydroMed
     may use up any packaging, labeling or promotional material that it has at
     the time of the update, either in stock or in process.

5.4  CHANGES.  Each Party may discontinue, alter or add new trademarks to be
     used in connection with the labeling and marketing of the Product in the
     Territory for use in the Approved Indications; provided that: (a) the
     foregoing shall not be deemed to allow Paladin to use or place a product
     name owned by Paladin or licensed by Paladin from a Third Party on the
     Product; and (b) each Party may use up any packaging, labeling or
     Promotional Materials that it has at the time of the discontinuance,
     alteration or addition, either in stock or in process.

5.5  NO OTHER RIGHTS; ALLOCATION OF GOODWILL.  Except for the licenses granted
     by each of HydroMed and Paladin to the other under this Agreement, neither
     Party shall acquire any right, title, or interest in any trademark, trade
     name, logo or trade dress of the other Party by reason of this Agreement.
     Each of Paladin and HydroMed shall be responsible for registering, as
     necessary, its own trademarks, trade names, logos and trade dress. Paladin
     acknowledges that all use of any of HydroMed's trade names, trademarks,
     trade dress and logos and all of the goodwill associated therewith shall
     inure solely to HydroMed's benefit. Likewise, HydroMed acknowledges that
     all use of any of Paladin's trademarks, trade dress, trade names, and
     logos, and all of the goodwill associated therewith shall inure solely to
     Paladin's benefit.

5.6  EFFECT OF TERMINATION.  Upon termination of this Agreement both parties
     shall immediately cease all use of the other party's trademarks, trade
     names, logos and trade dress, except as set forth in Section 13.7

                      ARTICLE 6 - PRICING AND PAYMENT TERMS

6.1  TRANSFER FEE.  Paladin shall pay HydroMed a transfer fee for each unit of
     the Product supplied by HydroMed to Paladin under this Agreement (the
     "Transfer Fee"). The Transfer Fee is USD $190 per unit of the Product.
     Paladin shall pay HydroMed's invoices for Transfer Fees no later than
     forty-five (45) days after receipt of each shipment of the Product.

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6.2  ROYALTIES.  In consideration of HydroMed's grant of license rights to the
     Intellectual Property under this Agreement, Paladin shall pay HydroMed
     royalties in an amount equal to eight percent (8%) of Net Sales. Paladin
     shall pay the royalties due under this Agreement no later than forty-five
     (45) days following the completion of each Calendar Quarter.

6.3  REFUND FOR PRE-CLINICAL AND CLINICAL ACTIVITIES.  If the TPD requires
     pre-clinical or clinical activities to grant Regulatory Approval for use of
     the Product in the Primary Indication or any Other Indication developed by
     HydroMed beyond those activities currently being undertaken or subsequently
     undertaken by HydroMed at its expense to obtain approval to sell the
     Product, HydroMed and Paladin will mutually agree as to how to undertake
     such pre-clinical and/or clinical activities and following such agreement,
     HydroMed will pay the first Two Hundred Fifty Thousand Dollars ($250,000)
     of such pre-clinical and/or clinical activities and Paladin shall pay all
     amounts above Two Hundred Fifty Thousand Dollars ($250,000).
     Notwithstanding the foregoing, if Paladin has not made an equity investment
     in HydroMed of at least One Million Dollars ($1,000,000) in accordance with
     the Investment Agreement between Paladin and HydroMed dated the Effective
     Date (the "Investment Agreement"), then HydroMed need not pay for such
     pre-clinical or clinical activities and instead will refund to Paladin the
     actual out-of-pocket cost paid by Paladin for such pre-clinical and
     clinical activities subject to the following conditions and limitations:

     (a)  HydroMed shall be required to make such refund only after Paladin
          makes an equity investment in HydroMed of at least One Million Dollars
          ($1,000,000) in accordance with the Investment Agreement;

     (b)  HydroMed shall make such refund only after Paladin has provided to
          HydroMed invoices and other documentation and records reasonably
          requested by HydroMed supporting Paladin's calculation of the actual
          out-of-pocket cost paid by Paladin for such pre-clinical and clinical
          activities; and

     (c)  the aggregate amount of such refund shall not exceed Two Hundred Fifty
          Thousand Dollars ($250,000).

6.4  QUARTERLY REPORT.  Within forty-five (45) days following the end of each
     Calendar Quarter, Paladin shall render a written report to HydroMed setting
     forth the following information and calculations for such Calendar Quarter:

     (a)  Net Sales for the Calendar Quarter;

     (b)  the actual number of Product sold (net of returns) for the Calendar
          Quarter; and

     (c)  the calculation of royalties payable to HydroMed pursuant to Section
          6.2.

6.5  ANNUAL REPORT.  Within sixty (60) days following the end of each Calendar
     Year, Paladin shall render a written report to HydroMed setting forth the
     Net Sales for the Calendar Year.

6.6  PHASE IV AND SAMPLE SUPPLIES.  In accordance with Sections 3.4 and 4.7,
     Paladin shall pay HydroMed for HydroMed's supply of the Product for use in
     Phase IV clinical trials and samples in an amount equal to HydroMed's fully
     burdened manufacturing cost. Paladin shall

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     pay HydroMed's invoices for such supplies within forty-five (45) days after
     receipt of the Product.

6.7  PAYMENT.  All amounts due to HydroMed in accordance with the terms hereof
     shall be paid by cheque or wire transfer in Dollars to such bank as
     HydroMed may direct from time to time. Overdue amounts shall bear interest
     at a rate equal to the lower of 1.5% per month or the highest rate
     permitted by law from the due date until the date paid. All expenses
     incurred by Paladin in making such transfers shall be borne by Paladin. For
     amounts collected by Paladin in currency other than Dollars, such amounts
     shall be converted to Dollars using the exchange ratio set forth in the
     Wall Street Journal on the last day of the relevant Calendar Quarter.

6.8  RECORDS.  Paladin shall record all sales of Product and shall keep full and
     true books of account and other records in accordance with the requirements
     of generally accepted accounting principles in Canada and other good
     business practice so that details of sales for the Product, the calculation
     of Net Sales and Paladin's payment obligations in respect thereof may be
     properly ascertained.

6.9  AUDIT.  Paladin agrees, at the request of HydroMed and at HydroMed's
     expense, to permit an independent accounting firm of recognized Canadian
     national standing, selected by HydroMed to have access, upon reasonable
     notice, during ordinary business hours and no more frequently than once in
     any Calendar Year, to such books of account and other records as may be
     necessary to determine the correctness of any report by Paladin to HydroMed
     in accordance with this Article 6. If such independent certified public
     accountant shall determine that an amount is due and owing by one Party to
     the other, then the owing Party shall promptly pay the amount due and
     owing, provided that if the Party owing the amount is Paladin and such
     amount is five percent (5%) or more of the total amount that should have
     been paid to HydroMed under this Agreement in respect of the audited
     period, then Paladin shall also reimburse HydroMed for the cost of the
     audit.

                       ARTICLE 7 - MANUFACTURE AND SUPPLY

7.1  MANUFACTURING.  HydroMed shall, directly or through an Affiliate or Third
     Party designee, have the sole right and responsibility for manufacturing,
     assembling, packaging and labeling the Product in such quantities as, in
     HydroMed's opinion, are required to fill all orders and for maintaining
     such inventory levels of raw materials and packaging components as are
     required to meet Paladin's then-current forecast for the Product. HydroMed
     shall require and ensure that each Product is assembled and packaged in
     accordance with GMPs and all applicable Laws and includes the Labels.
     Paladin shall be responsible for supplying camera-ready proofs of all
     Labels and other artwork to be included with the Product.

7.2  SUPPLY.  HydroMed or its Affiliates shall supply Paladin with all of its
     requirements in the Territory for the Product for use in the Approved
     Indications in finished package form. HydroMed shall use all reasonable
     efforts to supply Paladin with a sufficient quantity of the Product to
     satisfy Paladin's forecasted needs from time to time throughout the Term
     and in accordance with the terms of this Agreement. Notwithstanding
     anything to the contrary, HydroMed shall have no obligation or liability
     for its failure or inability to satisfy orders for the Product that exceeds
     the Forecast in effect for the relevant period at the time of ordering by
     forty percent (40%).

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7.3  FAILURE TO SUPPLY.  In the event that HydroMed or its Affiliates are unable
     to supply the Product in specified quality or in quantities sufficient to
     meet forecast demand for a cumulative period of ninety (90) Business Days
     in any twelve (12) month period ("Supply Failure Period"), then Paladin may
     elect in its sole and absolute discretion to either:

     7.3.1. as its sole and exclusive remedy, receive liquidated damages in an
          amount equal to (i) the Net Sales that Paladin would have generated
          from the last day of the Supply Failure Period until the date that is
          twelve (12) months later less (ii) the product of the Transfer Fee
          multiplied by the aggregate number of units of the Product forecasted
          to be ordered during such twelve (12) month period (as set forth in
          the most recent Forecast provided pursuant to Section 8.3), provided
          that

     (a)  if Paladin elects to receive liquidated damages under this Section
          7.3.1, then HydroMed shall be relieved of its obligations under
          Article 7 and Article 8 to manufacture and supply Paladin with Product
          (both in respect of any unsatisfied Purchase Orders and any new
          Purchase Orders that Paladin may place with HydroMed) until such time
          as HydroMed notifies Paladin that it is able to resume supply of the
          Product under the terms of this Agreement, except that if HydroMed
          does not give such notice within twelve (12) months after the last day
          of the Supply Failure Period, this Agreement shall automatically
          terminate; and

     (b)  if HydroMed's inability to supply is caused by an Event of Force
          Majeure, the option provided by this Section 7.3.1 shall not be
          available to Paladin; or

     7.3.2. have the Product made by a Third Party manufacturer designated by
          HydroMed and approved by Paladin, which approval shall not be
          unreasonably withheld, conditioned, denied or delayed. If Paladin
          makes such an election, HydroMed shall grant the Third Party
          manufacturer a non-exclusive, royalty-free license under the
          Intellectual Property for the sole purpose of manufacturing and
          selling to Paladin the quantity of the Product that HydroMed is unable
          to supply.

7.4  SUPPLY RESUMPTION.  If Paladin exercises its rights to have a Third Party
     manufacturer manufacture the Product pursuant to Section 7.3 and thereafter
     during the Term HydroMed desires to resume supplying Paladin with the
     Product (whether by HydroMed or otherwise), then HydroMed shall notify
     Paladin of such desire. Paladin shall then resume purchasing Product
     exclusively from HydroMed for the remainder of the Term as soon as HydroMed
     demonstrates to Paladin's reasonable satisfaction that HydroMed (whether by
     HydroMed or otherwise) is capable of re-establishing a satisfactory supply
     of the Product; provided that Paladin shall not be required to cancel any
     purchase orders for the Product issued to the Third Party manufacturer that
     were issued in accordance with the Forecasts provided to HydroMed pursuant
     to Section 8.3 prior to the date that HydroMed gave Paladin notice of its
     desire to resume supply and cover periods no more than six (6) months after
     the date that HydroMed gave Paladin notice of its desire to resume supply.
     If and when HydroMed resumes supplying the Product pursuant to this Section
     7.4, the Third Party manufacturer shall be required to return to HydroMed
     all information provided to the Third Party manufacturer pursuant to
     Section 7.3 and any license granted to the Third Party manufacturer shall
     terminate. Notwithstanding anything in this Agreement to the contrary, upon
     the termination of this Agreement for any reason, the Third Party
     manufacturer shall be required to return to

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                                                                              17

     HydroMed all information provided to Third Party manufacturer pursuant to
     Section 7.3 and any license granted to the Third Party manufacturer shall
     terminate.

7.5  DOCUMENTATION AND CERTIFICATE OF ANALYSIS.  HydroMed shall provide Paladin
     with required supporting documentation for the manufacture and assembly of
     the Product in a form suitable for Paladin's submission to the TPD. A
     certificate of analysis and such other documentation specified in the
     Quality Agreement shall be delivered with each batch of the Product
     delivered to Paladin.

7.6  DELIVERY AND ACCEPTANCE.

     7.6.1. ACCEPTANCE.  Paladin shall not be obliged to accept delivery of any
          lot or batch of the Product unless the lot or batch meets the
          Specifications. Each lot or batch of the Product shall be considered
          accepted by Paladin unless Paladin has rejected the same by delivering
          written notice thereof to HydroMed as soon as is reasonably possible
          but in any event no later than forty-five (45) days after delivery of
          such lot or batch of the Product, unless re-testing is required in
          which case Paladin shall have another thirty (30) days from the date
          that re-testing is indicated as being required. Paladin is entitled to
          reject any batch which does not meet the Specifications or the
          requirements of GMPs, is incorrectly labeled, is not shipped in
          accordance with the shipping and handling requirements applicable
          thereto or does not contain the specified Labels ("Rejected Product").
          To the extent possible, Paladin shall verify counts and identify any
          damages to HydroMed within five (5) Business Days of receipt.
          Paladin's sole and exclusive remedy for any shortage in a shipment
          shall be for HydroMed to send additional units of the Product as soon
          as reasonably possible.

     7.6.2. REJECTION NOTICE.  A written notice of rejection shall be conclusive
          and binding upon HydroMed unless HydroMed notifies Paladin within
          forty-five (45) Business Days of receipt by HydroMed of the written
          notice of rejection that it denies responsibility for the problem in
          question. In the event of such a notice by HydroMed, representative
          samples of the Rejected Product shall be submitted to a mutually
          acceptable independent laboratory or consultant, as required, for
          analysis or review, the costs of which shall be paid by the party
          whose position is not sustained.

     7.6.3. REIMBURSED COSTS.  Paladin shall return all Rejected Product to
          HydroMed at Paladin's expense. If Rejected Products are determined to
          have not complied with the Specifications or the requirements of GMPs
          or were incorrectly labeled (including the Labels), then HydroMed
          shall reimburse the amount paid by Paladin, if any, for delivery of
          the Rejected Product to HydroMed.

7.7  IMPROVEMENTS; NEW FORMULATION.  HydroMed shall furnish Paladin with all
     information pertinent to the marketing, sale and promotion of the Product
     relating to any Improvements, which HydroMed may make from time to time to
     the Product, or to any new formulation of the Product. To the extent
     reasonably possible, HydroMed shall provide Paladin with six (6) months
     prior written notice of any anticipated Improvements or new formulations.

7.8  EXPIRATION DATE.  The expiration date for the Product will be as permitted
     by the applicable Regulatory Approval, provided that HydroMed acknowledges
     that it would be desirable to have expiration dates of at least twenty-four
     (24) months.

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                                                                              18

7.9  COMPLIANCE WITH LAWS.  HydroMed shall comply with all applicable Laws in
     the Territory in relation to the manufacture, handling and storage and sale
     of the Product until delivery to the ship-to location set forth in the
     applicable Purchase Order. Following delivery of the Product to the ship-to
     location set forth in the applicable Purchase Order, Paladin shall comply
     with all applicable Laws in relation to the handling, storage, distribution
     and sale of the Product in the Territory and HydroMed's then-current
     instructions relating to handling, storage and shipment of the Products in
     the Territory.

7.10 KITS.  HydroMed shall be responsible for obtaining all requisite consents
     and approvals from relevant Third Parties (other than Governmental Bodies)
     in connection with the assembly and packaging of the Kit and all of its
     contents. Paladin shall ensure that all components of the Kit have the
     necessary regulatory approvals from the TPD to be used, marketed,
     distributed and sold in the Territory, and HydroMed shall give Paladin
     reasonable assistance in this regard. HydroMed shall order, at its own
     cost, the Canadian Sourced Items from a Canadian manufacturer or wholesaler
     and require them to be delivered to the ship-to address set forth in
     Paladin's Purchase Order for the Product. Until packaged together with the
     Product and sold to a customer, the Canadian Sourced Items shall be owned
     by HydroMed, and Paladin shall store its inventory of the Canadian Sourced
     Items in a separate area that conspicuously identifies such items as the
     property of HydroMed. Paladin shall be solely responsible for packaging the
     Canadian Sourced Items with the Products in accordance with all Laws and
     GMPs. Paladin hereby assumes all risks regarding the Canadian Sourced
     Items, including any issues with respect to delivery, quantity and/or
     quality, provided that HydroMed shall cooperate in good faith with Paladin
     in resolving claims and issues with manufacturers) and/or wholesalers) of
     the Canadian Sourced Items.

              ARTICLE 8 - FORECASTS/ORDERING/TITLE AND RISK/RETURNS

8.1  ORDERING.  Paladin may order units of the Product by issuing binding
     purchase orders (each, a "Purchase Order") to HydroMed pursuant to the
     terms of this Agreement. Each Purchase Order shall state the quantity of
     the Product to be purchased, delivery date(s) and routing instructions,
     destination or destinations. No different or additional terms or conditions
     on any purchase order, acknowledgment or other transmittal, whether a
     standard business form or otherwise, utilized by Paladin or HydroMed in
     connection with the sale of the Product shall be construed or deemed to be
     an amendment of or supplement to this Agreement or otherwise binding on
     either Paladin or HydroMed.

8.2  ACCEPTANCE OR REJECTION OF PURCHASE ORDERS.  HydroMed shall indicate its
     acceptance or rejection of each Purchase Order within ten (10) Business
     Days after receipt; provided that HydroMed may reject a Purchase Order, in
     whole or in part, only if: (a) the Purchase Order fails to comply with the
     terms and conditions of this Agreement; (b) the delivery date is less than
     ninety (90) days from the date of HydroMed's receipt of such Purchase
     Order, or (c) if the volume under the Purchase Order and all other accepted
     Purchase Orders covering the applicable monthly period exceeds the volume
     set forth in Paladin's then-current forecast (delivered pursuant to Section
     8.3) by more than forty percent (40%). If requested by Paladin following
     Paladin's receipt of HydroMed's rejection notice under clause (c) above,
     HydroMed will use commercially reasonable efforts to deliver the excess
     volume of the Product specified in the rejected Purchase Order, but
     HydroMed's failure to so deliver the excess volume shall not be a breach of
     this Agreement. HydroMed's sole obligation in filling accepted Purchase
     Orders shall be to use commercially reasonable efforts to fill Paladin's

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                                                                              19

     orders for the Product. In no event shall HydroMed be liable to any third
     party for HydxoMed's failure to deliver the Product to Paladin by any
     delivery due date set forth in any Purchase Order.

8.3  FORECASTS.  Paladin shall provide HydroMed a non-binding twelve (12) month
     rolling forecast (the "Forecast") of Paladin's estimated requirements of
     the Product, itemized for use as commercial product or as samples, for the
     Term. The Forecast shall be reviewed and updated by Paladin no later than
     thirty (30) days before the start of each calendar quarter during the Term.
     Each such Forecast shall reflect a good faith attempt by Paladin to
     estimate quantity requirements of the Product, based on anticipated demand
     herefore.

8.4  SHIPMENT.  HydroMed will use diligent efforts to ship the Product ordered
     by Paladin within one hundred and twenty (120) days after its acceptance of
     Paladin's purchase order. The Products will be shipped CPT (Incoterms 2000)
     to the ship-to address set forth in Paladin's purchase order. HydroMed
     shall ensure that the Product is suitably packed for shipment in HydroMed
     standard containers.

8.5  PRODUCT LIABILITY INSURANCE.  HydroMed agrees to maintain product liability
     insurance consistent with its normal business practices to cover risks
     related to the Product and, upon Paladin's request, to provide Paladin with
     certificates of insurance attesting to the existence of such insurance.

8.6  ALL RISK INSURANCE.  Paladin agrees to maintain all risk and general
     liability insurance consistent with its normal business practices to cover
     risks related to the storage, marketing, sales, and distribution of the
     Product in the Territory, and, upon HydroMed's request, to provide HydroMed
     with certificates of insurance attesting to the existence of such
     insurance. HydroMed agrees to maintain all risk and general liability
     insurance consistent with its normal business practices to cover normal
     business risks and including intellectual property claims, and, upon
     Paladin's request to provide Paladin with certificates of insurance
     attesting to the existence of such insurance. Each Party shall name the
     other Party as a co-insured under each insurance policy.

8.7  INSURANCE NOTIFICATION.  Each Party agrees, upon request, to advise the
     other Party of the status of the insurance required by this Article 8 and
     of any change in such status. It is understood and agreed that furnishing
     of such insurance coverage will not relieve either Party of their
     obligations under this Agreement.

8.8  RETURNS.  Returns to Paladin of the Product sold after the Effective Date
     shall be made in accordance with the Returns Policy set forth in Schedule
     8.8 hereto. The policy shall be communicated to customers in an appropriate
     fashion. Destruction of the returned Product is the responsibility of
     Paladin. The returned Product will be destroyed in accordance with all
     appropriate Laws relating to the disposal of pharmaceutical products,
     including any and all appropriate environmental Laws.

                          ARTICLE 9 - QUALITY AGREEMENT

9.1  QUALITY.  Both Parties agree that responsibility for quality control,
     processes and procedures as they relate to the Product shall be governed by
     the Quality Agreement to be attached hereto as Schedule 9.1 after HydroMed
     and Paladin mutually agree to the Quality

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                                                                              20

     Agreement. The quality control, processes and procedures defined in the
     Quality Agreement shall include without limitation the procurement of
     components/ingredients, the manufacture of bulk product, the packaging of
     the bulk product, the creation of printed materials, the analytical testing
     of ingredients, components and final product, the execution of stability
     protocols, and the Quality Control Release procedure. Upon approval from
     the regulatory and scientific affairs departments of both companies, the
     Quality Agreement will serve as the standard of operation between the two
     Parties. To the extent of any conflict between the provisions of the
     Quality Agreement and any other agreement between the parties dealing with
     the same subject matter, the Quality Agreement shall prevail.

                   ARTICLE 10 - REPRESENTATIONS AND WARRANTIES

10.1 REPRESENTATIONS AND WARRANTIES OF HVDROMED.  HydroMed hereby makes the
     following covenants, representations and warranties to Paladin and does so
     in full understanding and acknowledgement that Paladin is relying on its
     said representations and warranties in entering into this Agreement,
     notwithstanding any due diligence investigation done or information
     obtained by Paladin prior to the Effective Date:

     (a)  STATUS.  HydroMed is a corporation organized and existing under the
          Laws of the State of Delaware, U.S.A. No action has been taken by the
          directors, officers or shareholders of HydroMed to dissolve the
          corporation. HydroMed has the corporate power and authority to enter
          into the present Agreement and to perform all its obligations
          hereunder.

     (b)  ALL NECESSARY PROCEEDINGS.  The execution and delivery by HydroMed of
          this Agreement, the performance by HydroMed of all the terms and
          conditions thereof to be performed by it and the consummation of the
          transactions contemplated hereby have been duly authorized by all
          necessary corporate actions and proceedings, and no other act or
          approval of any Person is required to authorize such execution,
          delivery, and performance.

     (c)  NO VIOLATION.  HydroMed warrants that the execution, delivery and
          performance of this Agreement by it: (i) does not and will not violate
          or conflict with any provision of Law or any provision of its articles
          of incorporation or by-laws; and (ii) does not and will not, with or
          without the passage of time or the giving of notice, result in the
          breach of, or constitute a default, cause the acceleration of
          performance, or require any consent under, or result in the creation
          of any lien, charge or encumbrance upon any of its property or assets
          pursuant to any material instrument or agreement to which it is a
          party or by which it or its properties may be bound or affected.
          Without limiting the generality of the foregoing, HydroMed has not
          made any written or oral agreement or undertaking with any other
          Person regarding the rights to promote, distribute or sell the Product
          or to seek Regulatory Approval for the Product in the Territory.

     (d)  COMPLIANCE.  HydroMed warrants that the Product to be manufactured and
          assembled by it or by any of its Affiliates shall be in compliance
          with the Specifications at the time of delivery to ship-to address set
          forth in the applicable purchase order and all applicable Laws in
          relation to the manufacturing, handling, storage and labeling of the
          Product. Without limiting the generality of the foregoing,

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                                                                              21

          HydroMed warrants that the Product will be manufactured in accordance
          with GMPs. Once per Calendar Year, HydroMed shall provide to Paladin a
          letter stating that the manufacturing batch records have been reviewed
          and accepted according to GMPs. HydroMed further warrants that it will
          supply Paladin with Product that, at the time of shipment, will have a
          remaining shelf-life at least equal to the shelf-life permitted by the
          applicable Regulatory Approval (assuming storage in accordance with
          applicable requirements).

     (e)  THIRD PARTY CLAIMS.  To HydroMed's knowledge, as of the Effective
          Date, there is no outstanding or threatened claim or allegation that
          the marketing, distribution or sale of the Product or use of the Trade
          Marks in accordance with this Agreement infringe upon any rights of a
          Third Party.

     (f)  RIGHT TO GRANT LICENSES.  To HydroMed's knowledge, HydroMed is the
          sole and exclusive owner or licensee of all Intellectual Property
          needed to market, distribute and sell the Product in the Territory in
          accordance with this Agreement. HydroMed has the full right, power and
          authority to grant the rights granted to Paladin hereunder, free and
          clear of any mortgage, lien or encumbrance.

     (g)  DISCLOSURE.  HydroMed has licensed to Paladin under this Agreement all
          Intellectual Property owned or controlled by HydroMed relating to the
          Product necessary for Paladin to perform its obligations under this
          Agreement. HydroMed has faithfully informed Paladin about all
          information in its knowledge or possession or control concerning the
          safety and efficacy of the Product, and any side effects, injury,
          toxicity or sensitivity reactions and incidents associated with all
          uses, studies, investigations or tests involving the Product (animal
          or human) throughout the world.

     (h)  REGULATORY APPROVAL.  As of the Effective Date of this Agreement,
          HydroMed is not aware of any facts that would reasonably lead it to
          conclude that the Product will be unable to receive Regulatory
          Approval in the Territory.

     (i)  INTELLECTUAL PROPERTY PROTECTION.  HydroMed has not and will not
          knowingly or intentionally take any action, and will use its best
          efforts to assure that its Affiliates will not knowingly or
          intentionally take any action, during the term of the Agreement, that
          could adversely affect the Intellectual Property covering the Product,
          including without limitation, the distinctiveness or value of the
          Trade Marks. HydroMed shall not authorize or undertake any use of the
          Trade Marks (other than HydroMed and its variations) or any variation
          thereof in the Territory in connection with any products or materials
          other than the Product or materials associated with the Product.

10.2 REPRESENTATIONS AND WARRANTIES OF PALADIN.  Paladin hereby makes the
     following covenants, representations and warranties to HydroMed and does so
     in full understanding and acknowledgement that HydroMed is relying on its
     said representations and warranties in entering into this Agreement:

     (a)  STATUS.  Paladin is a corporation organized and existing under the
          Laws of Canada. No action has been taken by the directors, officers or
          shareholders of Paladin to

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                                                                              22

          dissolve the corporation. Paladin has the corporate power and
          authority to enter into the present Agreement and to perform all its
          obligations hereunder.

     (b)  ALL NECESSARY PROCEEDINGS.  The execution and delivery by Paladin of
          this Agreement, the performance by Paladin of all the terms and
          conditions thereof to be performed by it and the consummation of the
          transactions contemplated hereby have been duly authorized by all
          necessary corporate actions and proceedings, and no other act or
          approval of any Person is required to authorize such execution,
          delivery, and performance.

     (c)  NO VIOLATION.  Paladin warrants that the execution, delivery and
          performance of this Agreement by it: (i) does not and will not violate
          or conflict with any provision of Law or any provision of its articles
          of incorporation or by-laws; and (ii) does not and will not, with or
          without the passage of time or the giving of notice, result in the
          breach of, or constitute a default, cause the acceleration of
          performance, or require any consent under, or result in the creation
          of any lien, charge or encumbrance upon any of its property or assets
          pursuant to any material instrument or agreement to which it is a
          party or by which it or its properties may be bound or affected.

     (d)  COMPLIANCE.  Paladin shall comply with all applicable Laws in relation
          to the handling, storage, distribution and sale of the Product.

     (e)  TRADE MARKS.  Paladin shall not authorize or undertake any use of any
          mark that is confusingly similar to the Trade Marks in the Territory.

10.3 NO IMPLIED REPRESENTATION OR WARRANTIES.  EXCEPT INSOFAR AS SPECIFICALLY
     PROVIDED FOR IN THIS ARTICLE 10, THE REPRESENTATIONS AND WARRANTIES SET OUT
     ABOVE IN THIS ARTICLE 10 ARE THE ONLY REPRESENTATIONS AND WARRANTIES GIVEN
     BY EITHER PARTY HEREIN AND ARE MADE IN LIEU OF ALL OTHER REPRESENTATIONS
     AND WARRANTIES, EXPRESS OR IMPLIED. THERE IS NO OTHER CONDITION OR WARRANTY
     THAT THE PRODUCT SHALL BE FREE FROM CLAIMS OF INFRINGEMENT, MERCHANTABLE OR
     FIT FOR ANY PARTICULAR PURPOSE, OR SHALL SUCCESSFULLY RECEIVE REGULATORY
     APPROVAL.

10.4 LIMITS ON REPRESENTATIONS AND WARRANTIES.  Nothing herein shall be
     construed as a representation or warranty by Paladin that it will be
     successful in obtaining Regulatory Approval for the Product for any
     indication.

                          ARTICLE 11 - INDEMNIFICATION

11.1 BY PALADIN.  Paladin shall indemnify HydroMed, its affiliates and their
     respective directors, officers, shareholders, employees or agents
     (collectively, the "HydroMed Releasees"), and hold it harmless from and
     against any and all Losses (including personal injury, death or property
     damage) arising from any and all Third Party claims against the HydroMed
     Releasees: (a) relating to the marketing, distribution or sale of the
     Product in the Territory to the extent such claims are the result of the
     fault, negligence or willful misconduct of Paladin, or its Affiliates, or
     their respective directors, officers, shareholders, employees or agents;
     (b) of any nature whatsoever relating to the Canadian Source Items and/or
     any processing or

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                                                                              23

     repackaging of the Product in connection with Paladin's incorporation of
     the Canadian Source Items with the Product; or (c) caused by a breach or
     misstatement by Paladin of its representations and warranties under this
     Agreement; except to the extent such Third Party claims result from the
     fault, negligence or willful misconduct of the HydroMed Releasees or its
     or their failure to comply with the terms of this Agreement. Paladin shall
     not be liable under this Section 11.1 in the event that the HydroMed
     Releasees admit or settle any such claim without the prior written consent
     of Paladin, which consent shall not be unreasonably withheld, conditioned,
     delayed or denied.

11.2 BY HYDROMED.  HydroMed shall indemnify Paladin, its Affiliates and their
     respective directors, officers, shareholders, employees or agents
     (collectively, the "Paladin Releasees"), and hold it harmless from and
     against any and all Losses (including personal injury, death or property
     damage) arising from any and all Third Party claims against the Paladin
     Releasees: (a) that the manufacture, use or sale of the Product in
     accordance with this Agreement infringes the intellectual property rights
     of a third party in the Territory; (b) of any nature whatsoever relating to
     the manufacture or use of the Product; or (c) caused by a breach or
     misstatement by HydroMed of its representations and warranties under this
     Agreement; except to the extent such Third Party claims result from the
     fault or negligence of the Paladin Releasees, or its or their failure to
     comply with the terms of this Agreement. HydroMed shall not be liable under
     this Section 11.2 in the event that the Paladin Releasees admit or settle
     any such claim without the prior written consent of HydroMed, which consent
     shall not be unreasonably withheld, delayed or denied.

11.3 INDEMNIFICATION PROCEDURE.  A Party seeking indemnification (the
     "Indemnified Party") shall notify, in writing, the other Party (the
     "Indemnifying Party") within fifteen (15) Business Days of the assertion of
     any claim or discovery of any fact upon which the Indemnified Party intends
     to base a claim for indemnification. An Indemnified Party's failure to so
     notify the Indemnifying Party shall not, however, relieve such Indemnifying
     Party from any liability under this Agreement to the Indemnified Party with
     respect to such claim except to the extent that such Indemnifying Party is
     actually denied, during the period of delay in notice, the opportunity to
     remedy or otherwise mitigate the event or activity (ies) giving rise to the
     claim for indemnification and thereby suffers or otherwise incurs
     additional liquidated or other readily quantifiable damages as a result of
     such failure.

11.4 DEFENDING CLAIMS.  The Indemnifying Party, while reserving the right to
     contest its obligations to indemnify hereunder, shall be responsible for
     the defense of any claim, demand, lawsuit or other proceeding in connection
     with which the Indemnified Party claims indemnification hereunder. The
     Indemnified Party shall have the right, at its expense, to participate
     jointly with the Indemnifying Party in the defense of any such claim,
     demand, lawsuit or other proceeding, but with respect to any issue involved
     in such claim, demand, lawsuit or other proceeding with respect to which
     the Indemnifying Party has acknowledged its obligation hereunder, the
     Indemnifying Party shall have the right to select counsel, settle, try or
     otherwise dispose of or handle such claim, demand, lawsuit or other
     proceeding on such terms as the indemnifying Party shall deem appropriate,
     subject to any reasonable written objection of the Indemnified Party.

11.5 INTELLECTUAL PROPERTY INFRINGEMENT.  HydroMed will notify Paladin if it
     receives any notice of infringement related to the activities engaged in
     under this Agreement, and advise Paladin of any litigation which may be
     initiated against it related to the activities engaged in under

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                                                                              24

     this Agreement, and will keep Paladin advised throughout such litigation.
     All costs of such litigation shall be borne by HydroMed unless any of the
     Paladin Releasees admit infringement or settle such litigation without the
     prior written consent of HydroMed, which consent shall not be unreasonably
     withheld, delayed or denied. Notwithstanding the foregoing, and without
     limiting the generality of Sections 11.2 through 11.4, in the event that
     the marketing, use or sale of the Product in accordance with this Agreement
     infringes or would infringe any Third Party intellectual property rights,
     the Party first becoming aware of same shall notify the other and, subject
     to Sections 11.2 through 11.4, the Parties shall discuss the matter and
     decide on a course of action. Should any such infringement claim or suit be
     upheld by a final, non-appealable order of a court that prevents Paladin
     from marketing, using and selling the Product in the Territory, HydroMed
     shall repurchase from Paladin, at cost, all of the Product currently in
     Paladin's stock that have not been sold. HydroMed may then, in its sole
     discretion after consultation with Paladin, elect to (i) change the Product
     so as to make it non-infringing; or (ii) obtain rights to the Third Party
     intellectual property rights and make such rights available to Paladin (it
     being understood that Paladin shall in no event be required to make any
     additional payments provided for herein for the grant of such rights). If,
     however, HydroMed chooses to do neither of the foregoing, then HydroMed
     shall inform Paladin and the Parties may mutually agree to terminate this
     Agreement, provided that if this Agreement is not so terminated, then
     HydroMed shall be relieved of its obligations under Article 7 and Article 8
     to manufacture and supply Paladin with Product (both in respect of any
     unsatisfied Purchase Orders and any new Purchase Orders that Paladin may
     place with Hydromed), and Paladin shall not be entitled to exercise any
     rights or remedies against HydroMed in respect of any failure to supply.

11.6 THIRD PARTY INFRINGEMENT.

     11.6.1. In the event that either Party determines that a Third Party (other
          than a permitted licensee, transferee or distributor of either Party)
          is making, using, or selling a product or process that may infringe
          any of the Intellectual Property relating to the Product, including
          later issued and acquired patents covering the Product, or any uses or
          processes pertaining thereto, it will promptly notify the other Party
          in writing.

     11.6.2. HydroMed shall be responsible for, in its sole discretion,
          obtaining a discontinuance of any infringement or bringing suit
          against a Third Party infringer relating to the Product.
          Notwithstanding anything contained herein to the contrary, HydroMed
          shall have the right, but not the obligation, to bring such a suit.
          HydroMed shall bear all the expenses of any such suit brought by it
          and shall, after retaining for itself an amount equal to such
          expenses, split equally the remaining balance of any and all recovery
          and damages therefrom with Paladin. Paladin agrees to be named as a
          co-plaintiff if HydroMed brings suit and shall cooperate with HydroMed
          (which shall include providing any necessary assistance and executing
          any necessary documents, with any reasonable, receipted out-of-pocket
          expenses being reimbursed to Paladin by HydroMed to the extent such
          expenses were previously approved in writing by HydroMed), and shall
          have the right to consult with HydroMed and to participate in and be
          represented by independent counsel in such litigation at its own
          expense. Except as otherwise specifically provided herein, HydroMed
          shall have control over any such suit, and decisions as to settlement,
          methods and/or terms and conditions for resolving the suit shall be
          made by HydroMed (after consultation with Paladin, should Paladin be
          joined as a party to such suit).

                                  CONFIDENTIAL
<PAGE>
                                                                              25

     11.6.3. In the event HydroMed chooses not to prosecute an infringement as
             aforesaid within ninety (90) days after learning of the
             infringement, Paladin shall have the right to do so. In such event,
             HydroMed shall cooperate with Paladin (which shall include
             providing any necessary assistance and executing any necessary
             documents, with any reasonable, receipted out-of-pocket expenses
             being reimbursed to HydroMed by Paladin to the extent such expenses
             were previously approved in writing by Paladin). Paladin shall bear
             all the expenses of any such suit brought by it and shall, after
             retaining for itself an amount equal to such expenses, split
             equally the remaining balance of any and all recovery and damages
             from such suit with HydroMed. No settlement, consent judgment or
             other voluntary final disposition of the suit may be entered into
             without the prior written consent of HydroMed.

                          ARTICLE 12 - CONFIDENTIALITY

12.1 CONFIDENTIAL INFORMATION.  For the purposes of this Agreement,
     "Confidential Information" means all verbal, written, electronically
     transmitted and/or machine reproduced information, chemical structures,
     data, documents, methods and Intellectual Property of or relating to the
     business of either Party or its Affiliates, already provided or disclosed
     by it or its Affiliates to the other Party, or which will be provided to
     the other Party under this Agreement, and all materials, data, results,
     reports and other documents generated by or on behalf of the other Party
     containing or regarding such information, data, documents, methods and
     Intellectual Property.

12.2 OBLIGATIONS.  During the term of this Agreement, each Party may supply to
     the other Party such Confidential Information as is considered useful
     solely for the purpose of enabling the other Party to perform its
     obligations hereunder (the "Purpose"). The other Party shall not use or
     allow the use of the Confidential Information for any other purpose.

12.3 EXCEPTIONS.  Neither Party shall have any obligation of non-disclosure or
     non-use hereunder with respect to any Confidential Information which:

     (a)  at the time of disclosure to the other Party is already available or
          known to the public;

     (b)  after disclosure to the other Party becomes available or known to the
          public through no breach of this Agreement;

     (c)  is already lawfully in the possession of the other Party at the time
          disclosure hereunder was made and such possession is documented by
          written evidence and not subject to any obligation of non-disclosure
          or non-use; or

     (d)  is received from a Third Party having the right to disclose same and
          who is not bound by obligations of non-disclosure and/or non-use.

12.4 UNAUTHORISED USE.  In case either Party becomes aware or has knowledge of
     any unauthorised use or disclosure of Confidential Information, it shall
     promptly notify the other Party of such unauthorised use or disclosure and,
     thereafter, shall take all reasonable steps to assist the other Party in
     attempting to minimise any potential or actual damages or losses resulting
     from such unauthorised use or disclosure.

                                  CONFIDENTIAL
<PAGE>
                                                                              26

12.5 RETURN OF DOCUMENTS.  Each Party, upon receipt of a written request from
     the other Party following the expiration or termination of this Agreement,
     shall promptly return to the other Party all Confidential Information of
     such other Party, including all reproductions and copies thereof together
     with all internal material and documents generated by it containing
     Confidential Information or references thereto, from which references the
     substance of the Confidential Information can be implied or understood and
     shall delete all references thereto stored electronically.

12.6 OWNERSHIP RIGHTS.  Each Party agrees that it shall not claim to have any
     rights, title or ownership in the Confidential Information of the other
     Party or any discoveries or inventions based on or derived from the
     Confidential Information, and that rights, title and ownership in the
     Confidential Information or any discoveries or inventions based on or
     derived from said Confidential Information shall, as between the Parties,
     rest in the other Party. Each party agrees to promptly disclose to the
     other Party any discoveries or inventions based on or derived from the
     Confidential Information. Each Party further agrees to assign (and does
     hereby assign) to the other Party, the sole and exclusive ownership in all
     such discoveries and inventions and to sign all documents and do all things
     required to give effect thereto.

12.7 TERM.  The provisions of this Article 12 shall survive the expiry or
     termination of the Agreement until all of the Confidential Information has
     fallen within one of the exceptions set forth in Sections 12.3(a) through
     (d) inclusive.

                        ARTICLE 13 - TERM AND TERMINATION

13.1 TERM.  This Agreement shall commence upon the Effective Date hereof, until
     the fifteenth (15th) anniversary date of the date on which Regulatory
     Approval is obtained for the Primary Indication, and shall automatically
     renew for subsequent three (3) year terms on the same terms and conditions,
     unless sooner terminated as provided elsewhere in this Agreement.

13.2 TERMINATION.  This Agreement may be terminated:

     (a)  By either Party if the other Party commits a Material Breach of any of
          its obligations under this Agreement and (i) fails to remedy the
          breach within thirty (30) Business Days of being required by the first
          Party to do so; or (ii) where remedy of the breach is not reasonably
          possible within thirty (30) Business Days, fails to propose a plan
          within twenty (20) Business Days which, in the opinion of the first
          Party acting reasonably, is capable of providing a remedy of the
          breach within ninety (90) Business Days.

     (b)  If either Party shall commence as debtor any proceedings under any
          bankruptcy, insolvency, readjustment of debt, dissolution or
          liquidation Law or any such proceeding shall be commenced against
          either Party, or any trustee or receiver shall be appointed therefor,
          and either Party shall by any act or failure to act indicate approval
          of or consent to, or acquiescence in such proceedings or in the
          appointment of any such trustee or receiver; or if any such
          proceedings brought against either Party shall be approved by any
          court and shall remain undismissed for thirty (30) Business Days after
          its levy, then in any such case, the Party not involved in such
          proceedings shall have the option to terminate this Agreement in its
          entirety by

                                  CONFIDENTIAL
<PAGE>
                                                                              27

          written notice of such termination to the Party involved in such
          proceedings and upon the giving of such notice this Agreement shall
          immediately terminate.

     (c)  By either Party, upon at least thirty (30) days prior written notice
          to the other Party, if, as a result of an Event of Force Majeure, the
          other Party is unable to fully perform its obligations hereunder for a
          period of one hundred fifty (150) consecutive days; provided that if
          the required performance is met during the thirty (30) day period,
          this Agreement shall continue in full force and effect as if the
          notice had not been given.

     (d)  By HydroMed if Paladin fails to make any equity investment in HydroMed
          when required by the Investment Agreement or chooses not to exercise
          its option to make an equity investment in HydroMed of at least One
          Million Dollars ($1,000,000) in accordance with the Investment
          Agreement.

     (e)  By Paladin if HydroMed fails to close, by June 30, 2003, one or more
          third party financing transactions raising at least Ten Million
          Dollars ($10,000,000) in the aggregate.

     (f)  By Paladin, if any Regulatory Authority has finally denied Regulatory
          Approval (or any material part thereof) for the Product with respect
          to the Primary Indication.

13.3 PARTIAL TERMINATION.  In the event that any termination hereunder is
     limited to one (1) or more, but not all forms, dosages or indications of
     the Product, then the effects of such termination shall only apply to the
     affected form(s), dosage(s) or indication(s), but shall not affect in any
     way the validity of this Agreement with respect to any other form or
     dosage.

13.4 REMEDIES NOT LIMITED.   The termination of this Agreement by either party
     shall not limit remedies that may be otherwise available.

13.5 SURVIVAL.  Expiration or termination of this Agreement for any reason shall
     not relieve either party of its obligations that have accrued prior to the
     expiration or termination of this Agreement. Without limiting the
     generality of the foregoing, Articles 1, 6, 11, 12 and 15 and Sections 2.3,
     4.4, 5.5, 5.6, 13.5, 13.6 and 13.7 of this Agreement shall survive
     expiration or termination of this Agreement.

13.6 POST-TERMINATION.  Unless HydroMed terminates this Agreement pursuant to
     Sections 13.2(a) or 13.2(b), during a six (6) month period following the
     expiry or termination hereof, Paladin may sell out its stock on hand of the
     Product. In addition, if Paladin terminates this Agreement under Section
     13.2(c) but the Event of Force Majeure giving rise to such termination only
     reduced HydroMed's capacity to supply the Product, then for six (6) months
     following such termination, HydroMed shall continue to supply Paladin with
     the Product in accordance with Section 14.5. All applicable provisions of
     this Agreement shall survive termination as necessary to give effect to
     this Section 13.6.

13.7 OTHER CONSEQUENCES OF TERMINATION.  Upon termination or expiration of this
     Agreement, Paladin shall, within thirty (30) days from the date of receipt
     of a request from HydroMed submit all necessary paperwork to TPD to request
     assignment of the NDS and DIN to HydroMed, if any, and any other Regulatory
     Approval held with respect to the Product and all Provincial Formulary
     listings, provided that HydroMed shall pay to Paladin an amount

                                  CONFIDENTIAL
<PAGE>
                                                                              28

     sufficient to cover any costs incurred by Paladin in connection with
     obtaining Regulatory Approval for the Product and transferring same back to
     HydroMed. In addition, Paladin shall promptly assign to HydroMed any
     sublicenses to the Intellectual Property granted by Paladin, and such
     sublicenses shall survive in accordance with their terms.

                           ARTICLE 14 - FORCE MAJEURE

14.1 DEFINITION.  For the purposes of this Agreement, an "Event of Force
     Majeure" shall include the following:

     (a)  acts of God;

     (b)  expropriation, confiscation or requisitioning of facilities or
          compliance with any Law which affects to a degree not presently
          existing the supply, availability or use of materials or labour;

     (c)  acts or inaction on the part of any Governmental Body or Person
          purporting to act therefor;

     (d)  embargoes, or acts of war or the public enemy, whether war be declared
          or not;

     (e)  strikes, public disorder, insurrection, rebellion, riots or violent
          demonstrations;

     (f)  floods, earthquakes, lightning, hail, inclement weather conditions or
          other natural calamities; and

     (g)  any circumstances whether or not of the class or kind specifically
          named above not within the reasonable control of a Party and which,
          despite the exercise of reasonable diligence, such Party is unable to
          prevent, avoid or remove.

14.2 PROCEDURE.  If any Party wishes to invoke an Event of Force Majeure, then
     it shall (i) immediately following the commencement of such Event of Force
     Majeure notify the other Parties of the occurrence of such Event of Force
     Majeure, the reasonably estimated date and time on which it commenced and
     the nature of the Event of Force Majeure, and (ii) as soon as reasonably
     practicable thereafter, submit to the other Parties proof of the Event of
     Force Majeure.

14.3 SUSPENSION OF OBLIGATIONS.  If one of the Parties is unable to perform its
     obligations under this Agreement because of an Event of Force Majeure,
     then such Party shall be excused from performance of its obligations under
     this Agreement until the Event of Force Majeure terminates and the
     obligations of such Party, which cannot be met due to the Event of Force
     Majeure, shall be suspended during the pendency of the Event of Force
     Majeure, provided that such Party uses all reasonable efforts to attempt to
     prevent, avoid or remove the Event of Force Majeure within the shortest
     possible delay. Nevertheless, an Event of Force Majeure has no effect on
     the obligation to pay a sum of money owing for the purchase of the Product.

14.4 RESOLUTION.  If either Party is excused from performance under this
     Agreement because of an Event of Force Majeure, then the Parties agree to
     promptly meet and to work in good faith together in an attempt to find
     appropriate solutions and to shorten the duration of the Event of Force
     Majeure, to the extent reasonably feasible.

                                  CONFIDENTIAL
<PAGE>
                                                                              29

14.5 ALLOCATION.  If an Event of Force Majeure only reduces HydroMed's capacity
     to supply the Product, then HydroMed shall allocate to Paladin its pro rata
     share of HydroMed's remaining output of the Product (determined by
     reference to the total number of units of Product purchased by Paladin
     during the preceding twelve (12) months and the total number of units of
     Product sold by HydroMed to any person (including Paladin and all Third
     Party's) during such twelve (12) month period).

                           ARTICLE 15 - MISCELLANEOUS

15.1 LIMITATIONS OF LIABILITY.  EXCEPT IN RESPECT OF HYDROMED'S INDEMNIFICATION
     OBLIGATIONS UNDER THIS AGREEMENT, IN NO EVENT SHALL HYDROMED'S LIABILITY TO
     PALADIN FOR DAMAGES UNDER OR IN RESPECT OF THIS AGREEMENT EXCEED, IN THE
     AGGREGATE, THE TOTAL AMOUNT PAID TO HYDROMED UNDER THIS AGREEMENT, WHETHER
     SUCH DAMAGES ARISE IN TORT, CONTRACT OR OTHERWISE. IN ADDITION, IN NO EVENT
     SHALL HYDROMED BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
     INDIRECT DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS
     LIMITATION WILL APPLY EVEN IF HYDROMED HAS BEEN ADVISED OF THE POSSIBILITY
     OF SUCH DAMAGES.

15.2 NOTICES.  Any notice or other communication required or permitted to be
     given hereunder shall be in writing and shall be delivered in person,
     transmitted by telecopy or similar means of recorded electronic
     communication or sent by internationally-recognized overnight courier mail,
     charges prepaid, addressed as follows:

     (a)  if to HydroMed:

          Hydro Med Sciences, Inc.
          8 Clarke Drive
          Cranbury, New Jersey
          08512-3617
          Attention: President

          Telephone: 609-409-9010
          Fax: 609-409-1650

     (b)  if to Paladin:

          Paladin Labs Inc.
          6111 Royalmount, Suite 102
          Montreal, Quebec
          H4P 2T4
          Attention: President

          Telephone: 514-340-1112
          Fax: 514-344-4675

          Any such notice or other communication shall be deemed to have been
          given and received on the day on which it was delivered or
          successfully transmitted (or, if such

                                  CONFIDENTIAL
<PAGE>
                                                                              30

          day is not a Business Day, on the next following Business Day) or, if
          sent by internationally-recognized overnight courier, on the date on
          which it was received or refused delivery. Either Party may change its
          address for service from time to time by giving notice thereof to the
          other Party in accordance with this Article.

15.3 AMENDMENTS.  No amendment or waiver shall be binding on either Party unless
     consented to in writing by such Party. No waiver of any provision of this
     Agreement shall constitute a waiver of any other provision, nor shall any
     waiver constitute a continuing waiver unless otherwise expressly provided.

15.4 DISPUTE RESOLUTION.  Other than as set out in this Agreement, any breach,
     controversy or claim arising out of or relating to this Agreement that
     cannot be resolved following good faith discussions between the Parties
     shall be forwarded to the President of each Party for review and
     resolution. Any dispute the Presidents are unable to resolve within thirty
     (30) Business Days shall be determined by arbitration. Arbitration shall be
     carried out in accordance with the Laws of the Province of Quebec before
     one (1) arbitrator. If the Parties cannot mutually agree upon an
     arbitrator, each Party shall name an arbitrator and the arbitrators so
     named shall agree upon a third (3rd) arbitrator. The place of arbitration
     shall be New York, New York. The language of the arbitration shall be
     English. The arbitration decision shall be final and binding on the
     Parties. The arbitration carried out hereunder shall apply to the exclusion
     of regular legal means, provided that the rights of the Parties in urgent
     situations in which time is of the essence to obtain proper remedies in
     courts of Law shall remain unimpaired.

15.5 ENTIRE AGREEMENT.  This Agreement and the Quality Agreement constitute the
     entire agreement between the Parties with respect to the subject matter
     hereof and supersede all prior agreements, understandings, letters of
     intent, negotiations and discussions, whether written or oral. There are no
     conditions, covenants, agreements, representations, warranties or other
     provisions, express or implied, collateral, statutory or otherwise,
     relating to the subject matter hereof except as herein provided. This
     Agreement shall not be changed or modified except in writing.

15.6 ASSIGNMENT.  The rights and obligations under this Agreement may not be
     assigned by either Party hereto (except to an Affiliate) without the prior
     written consent of the other Party, which consent shall not be unreasonably
     withheld or delayed.

15.7 FURTHER ASSURANCES.  Each Party will, from time to time subsequent to the
     date hereof, at the request and expense of any other Party, execute and
     deliver all such documents and do all such other acts and things as that
     other Party, acting reasonably, may from time to time request be executed
     or done in order to better evidence or perfect or effectuate any provision
     of this Agreement or any of the respective obligations intended to be
     created hereby or thereby.

15.8 PUBLICITY.  Neither Party shall issue any press release or other public
     announcement relating to existence or terms of this Agreement without the
     prior written consent of the other Party (which consent shall not be
     unreasonably withheld or delayed), except where such announcements are
     required by law or regulation, in which event the Parties will use all
     reasonable efforts to consult with each other and co-operate with respect
     to the wording of

                                  CONFIDENTIAL
<PAGE>
                                                                              31

      any such announcement. The Parties shall cooperate in issuing (an) initial
      public release (s) with respect to the signing of this Agreement, either
      separately or as a joint release.

15.9  COUNTERPARTS.  This Agreement may be executed in counterparts, each of
      which shall constitute an original and all of which taken together shall
      constitute one and the same instrument in effect as of the date first
      above mentioned.

15.10 GOVERNING LAW.  This Agreement shall be governed by and interpreted in
      accordance with the Laws in effect in the Province of Quebec and the Laws
      of Canada applicable therein.

15.11 LANGUAGE.  The parties hereto confirm that it is their wish that this
      Agreement as well as all other documents relating hereto, including
      notices, have been and shall be drawn up in the English language only. Les
      parties aux presentes confirment leur volonte que cette convention de meme
      que tous les documents, y compris tous avis, s'y rattachant, soient
      rediges en langue anglaise seulement.

                            (SIGNATURE PAGE FOLLOWS)

                                  CONFIDENTIAL
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the Parties as of the
date first hereinabove set out.

HYDRO MED SCIENCES, INC.

Per: /s/ David Tierney
     --------------------------------
Title: President & CEO                  Date: 10-3-2002

PALADIN LABS INC.

Per: /s/ Jonathan Goodman
     --------------------------------
Title: President & CEO                  Date: OCT 3/2002

                                  CONFIDENTIAL
<PAGE>
                                                                              33

                                 SCHEDULE 1.1(s)
                   TO THE LICENSE AND DISTRIBUTION AGREEMENT
                                     BETWEEN
                            HYDRO MED SCIENCES, INC.
                                       AND
                               PALADIN LABS INC.

                         CURRENT IMPLANT SPECIFICATIONS

Trade name:        Hydron Implant(TM)

Active Ingredient: Histrelin acetate

Form:              All dosage strengths and forms as well as all Improvements
                   (as defined in Section l.l(t).

                                  CONFIDENTIAL
<PAGE>
                                                                              34

                                 SCHEDULE 1.1(v)
                   TO THE LICENSE AND DISTRIBUTION AGREEMENT
                                     BETWEEN
                            HYDRO MED SCIENCES, INC.
                                       AND
                               PALADIN LABS INC.

                                 CONTENTS OF KIT

The Kit shall include the following components:

     -    Device to insert the Implant

     -    Betadine Swabsticks(1)

     -    Alcohol Swabs(1)

     -    Lidocaine HCl 1% and Epinephrine(1)

     -    25g x 1.5" Needles

     -    18g x l" Needles

     -    Gauze Sponges 4"

     -    Elastoplast

     -    Adson Forcep 4.75"

     -    Disposable Scalpels

The following components may be included in the Kit after mutual written
agreement between the Parties:

     -    Steri Strip Reinforced Adhesive Skin Closures

     -    Poly lined towel Fenestrated Sterile Field

     -    Vicryl Sutures Coated

     -    Curved Mosquito Hemostat 5" (Floor grade stainless steel)

     -    Latex Gloves

(1)  Canadian Sourced Items.

The Kit shall not include the Canadian Sourced Items at the time of shipment to
Paladin. Pursuant to Section 7.10, the Canadian Sourced Items will be ordered by
HydroMed from a Canadian manufacturer or wholesaler and shipped to the same
address as the ship-to address of the Purchase Order for the Product.

                                  CONFIDENTIAL
<PAGE>
                                                                              35

                                SCHEDULE 1.1(oo)
                   TO THE LICENSE AND DISTRIBUTION AGREEMENT
                                     BETWEEN
                            HYDRO MED SCIENCES, INC.
                                       AND
                                PALADIN LABS INC.

                             PRODUCT SPECIFICATIONS

   TO BE ATTACHED SUBSEQUENT TO THE EFFECTIVE DATE PURSUANT TO SECTION 1.1(oo)

                               KIT SPECIFICATIONS

   TO BE ATTACHED SUBSEQUENT TO THE EFFECTIVE DATE PURSUANT TO SECTION 1.1(oo)

                                  CONFIDENTIAL
<PAGE>
                                                                              36

                                  SCHEDULE 8.8
                   TO THE LICENSE AND DISTRIBUTION AGREEMENT
                                     BETWEEN
                            HYDRO MED SCIENCES, INC.
                                       AND
                                PALADIN LABS INC.

                                 RETURNS POLICY

ITEMS ELIGIBLE FOR RETURN

     Returns are limited to outdated merchandise in original packages, whether
returned to PALADIN directly or destroyed at the pharmacy site after approval by
a PALADIN Sales Representative.

TIME LIMIT

     Up to one (1) year after expiry or date of discontinuation.

CREDIT VALUE

     PALADIN'S invoiced wholesale price

ITEMS NOT ELIGIBLE FOR CREDIT

1.   Products damaged by fire, smoke, heat or water resulting from a fire or
     other insurable hazards.

2.   Products marked "Non-returnable", "Professional Sample", "Clinical Trial
     Package", or with similar markings or similar labels.

3.   Distress merchandise, such as items purchased from a bankruptcy sale,
     going-out-business sale, fire sale, or other merchandise generally
     considered under the classification "Distress Merchandise" will not qualify
     for credit under the general provision of the Returns Policy.

4.   Merchandise obtained via diverted or other means, including other products
     outside of Canada.

5.   Unexpired Products.

6.   Overstocked saleable Products returned to PALADIN without prior written
     authorization from HydroMed.

7.   Products damaged as a result of the negligence or improper storage or
     handling by PALADIN or any third party after delivery of the Product to
     PALADIN.

8.   Products not in its original packaging.

                                  CONFIDENTIAL
<PAGE>
                                                                              37

                                  SCHEDULE 9.1
                   TO THE LICENSE AND DISTRIBUTION AGREEMENT
                                    BETWEEN
                            HYDRO MED SCIENCES, INC.
                                       AND
                                PALADIN LABS INC.

                                QUALITY AGREEMENT

     TO BE ATTACHED SUBSEQUENT TO THE EFFECTIVE DATE PURSUANT TO SECTION 9.1

                                  CONFIDENTIAL

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