Document:

Exhibit 10.43

                         CONGRESS FINANCIAL CORPORATION
                           1133 Avenue of the Americas
                            New York, New York 10036

                                                             As of March 1, 2002

Atlantic Express Transportation Corp.
7 North Street
Staten Island, New York 10302

            Re:   Fourth Amendment to Loan Agreement

Ladies and Gentlemen:

      We refer to the Loan and Security Agreement dated December 22, 2000
between Congress Financial Corporation ("Lender"), Atlantic Express
Transportation Corp. and each of the parties listed on the signature pages
hereto (each individually, a "Borrower" and any two or more collectively,
"Borrowers"), as the same may be amended from time to time (the "Loan
Agreement"). Unless otherwise defined in this letter, all capitalized terms used
in this letter have the same meanings as set forth in the Loan Agreement.

      Borrowers have requested that Lender make certain amendments to the Loan
Agreement as set forth herein.

      Accordingly, each Borrower hereby agrees with Lender as follows:

      1. Amendments to Loan Agreement. Subject to the terms and conditions
hereof, the Loan Agreement is amended as follows:

            (a) Section 1 of the Loan Agreement is amended by adding the
following defined terms in their appropriate alphabetical order:

      "Applicable Vehicle CapEx Availability Sublimit" shall mean the amount of
      $90,000,000, as reduced on the first day of each month, commencing April
      1, 2002, by $1,000,000 per month.

      "GSCP" shall mean GSCP II (AE) Holdings, LLC.

      "Participation Agreement" shall mean that certain Junior Participation
      Agreement dated as of March 1, 2002 by and between Lender and GSCP.

<PAGE>

      "Special Supplemental Loans" shall mean the loans now or hereafter made by
      Lender to or for the benefit of a Borrower in accordance with the terms
      set forth in Section 2.4 hereof.

            (b) Section 1 of the Loan Agreement is amended by amending and
restating the following defined terms in their entirety to read as follows:

      "Adjusted Net Worth" shall mean as to any Person, at any date, in
      accordance with GAAP (except as otherwise specifically set forth below),
      on a consolidated basis for such Person and its subsidiaries (if any), the
      amount equal to the difference between: (a)(i) the aggregate net book
      value of all assets of such Person and its subsidiaries, calculating the
      book value of inventory for this purpose on a first-in-first-out basis,
      after deducting from such book values all appropriate reserves in
      accordance with GAAP (including all reserves for doubtful receivables,
      obsolescence, depreciation and amortization) plus (ii) an amount equal to
      eighty percent (80%) of the outstanding principal balance of (A) the
      Special Supplemental Loans at such date or (B) if designated by an
      election in writing from Parent to Lender in connection with the
      determination of Adjusted Net Worth as at the end of any fiscal quarter or
      fiscal year of Parent, the Special Supplemental Loans on a date which is
      (1) not more 45 days after the end of any fiscal quarter of Parent other
      than the fourth quarter of a fiscal year or (2) not more than 90 days
      after the end of any fiscal year of Parent, (iii) an amount equal to any
      reductions or elimination of previously recorded deferred tax assets and
      (iv) an amount equal to any reductions or elimination of previously
      recorded assets due to impairment of such assets under Statement of
      Financial Accounting Standard No. 141 or No. 142, and (b) the aggregate
      amount of the indebtedness and other liabilities of such Person and its
      subsidiaries (including tax and other proper accruals).

      "EBITDA" shall mean, for any period, net income or loss of the Parent and
      its Subsidiaries for such period, determined on a consolidated basis in
      accordance with GAAP, plus (a) to the extent deducted in computing such
      consolidated net income or loss, without duplication, the sum of (i)
      income tax expense, (ii) Interest Expense, (iii) depreciation and
      amortization expense, and (iv) non-cash extraordinary or nonrecurring
      losses or expenses, minus (b) to the extent added in computing such
      consolidated net income or loss, without duplication, extraordinary or
      non-recurring income or gains, plus (c) an amount equal to the sum of (i)
      eighty percent (80%) of the aggregate principal balance of Special
      Supplemental Loans made during such period (net of any payments of such
      Special Supplemental Loans paid during such period) and (ii) capital
      contributions to the Parent from its stockholders received in the form of
      cash made available to Borrowers to use as working

                                       2
<PAGE>

      capital during such period and, with respect to clauses (i) and (ii)
      above, if designated by an election in writing from Parent to Lender,
      eighty percent (80%) of the aggregate principal balance of Special
      Supplemental Loans (net of repayments) and cash capital contributions made
      (A) within 45 days after the end of any period ending on the last day of
      fiscal quarter of Parent (other than the fourth quarter of a fiscal year)
      or (B) within 90 days after the end of any period ending on the last day
      of any fiscal year of Parent, provided, that, any such loan or
      contribution designated to be included in a prior period may not be
      included in any subsequent calculation of EBITDA for the period in which
      it was made or received, and provided further that, the maximum cumulative
      amount that may be included pursuant to clause (c) for all periods shall
      not exceed $25,000,000."

      "Existing Holders" shall mean GSCP, Domenic Gatto and Wafra Acquisition
      Fund.

      "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
      three-quarters of one (3/4%) percent per annum in excess of the Prime Rate
      and, as to Special Supplemental Loans, a rate of eighteen percent (18%)
      per annum and, as to Eurodollar Rate Loans, a rate of two and
      three-quarter (2-3/4%) percent per annum in excess of the Adjusted
      Eurodollar Rate (based on the Eurodollar Rate applicable for the Interest
      Period selected by a Borrower as in effect three (3) Business Days after
      the date of receipt by Lender of the request of such Borrower for such
      Eurodollar Rate Loans in accordance with the terms hereof, whether such
      rate is higher or lower than any rate previously quoted to such Borrower);
      provided, that, the Interest Rate shall mean the rate of two and
      three-quarters (2 3/4%) percent per annum in excess of the Prime Rate as
      to Prime Rate Loans and all other non-contingent Obligations (other than
      Eurodollar Rate Loans and Special Supplemental Loans), the rate of
      eighteen (18%) percent per annum as to Special Supplemental Loans, and the
      rate of four and three-quarters (4 3/4%) percent per annum in excess of
      the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Lender's
      option, without notice, (a) for the period on and after the date of
      termination or non-renewal hereof, or the date of the occurrence of any
      Event of Default or event which with notice or passage of time or both
      would constitute an Event of Default, and for so long as such Even of
      Default or other event is continuing and until such time as all
      Obligations are indefeasibly paid in full (notwithstanding entry of any
      judgment against any Borrower) and (b) on the Loans at any time
      outstanding in excess of the amounts available to Borrowers under Section
      2 (whether or not such excess(es) arise or are made with or without
      Lender's knowledge or consent and whether made before or after an Event of
      Default).

                                       3
<PAGE>

      "Loans" shall mean the Revolving Loans and the Loans made pursuant to
      Sections 2.3 and 2.4.

      "Maximum Credit" shall mean the amount of $143,000,000; provided, that,
      the maximum credit available pursuant to Section 2.1 hereof shall not
      exceed $125,000,000 and the maximum credit available pursuant to Section
      2.4 hereof shall not exceed $18,000,000.

            (c) The term "Obligations" in Section 1 of the Loan Agreement is
amended by deleting the word "Revolving" on the first line thereof.

            (d) Section 2.1(a)(iii)(A) of the Loan Agreement is amended by
substituting the term "Applicable Vehicle CapEx Availability Sublimit" in place
of "$90,000,000".

            (e) Section 2 of the Loan Agreement is amended by adding the
following as Section 2.4 thereof and renumbering existing Sections 2.4 and 2.5
as Sections 2.5 and 2.6, respectively:

            2.4 Special Supplemental Loans. Subject to, and upon the terms and
      conditions contained herein, Lender agrees, commencing March __, 2002, to
      make non-revolving loans (the "Special Supplemental Loans") to each
      Borrower from time to time; provided that the Participant under the
      Participation Agreement shall have agreed to purchase additional
      Participations in an amount sufficient to fund the Special Supplemental
      Loan. Any Special Supplemental Loan requested by a Borrower or Borrowers'
      Representative shall not exceed the amount by which the Participant's
      Interest (as defined in the Participation Agreement) then exceeds the then
      outstanding principal balance of the Special Supplemental Loans. The
      Special Supplemental Loans (a) are to be repaid, together with interest
      and other amounts, in accordance with this Agreement, and the other
      Financing Agreements, (b) are secured by all the Collateral and (c) may
      not be reborrowed to the extent that all or any part thereof has been
      repaid. The aggregate principal amount of the Special Supplemental Loans
      outstanding to all Borrowers at any time shall not exceed the lesser of
      the Maximum Credit applicable to the Special Supplemental Loans or the
      amount of the then outstanding amount of the Participant's Interest. In
      the event that the outstanding amount of the Special Supplemental Loans at
      any time exceeds the then outstanding amount of the Participant's Interest
      or the Maximum Credit applicable to Special Supplemental Loans, such event
      shall not limit, waive or otherwise affect any rights of Lender in that
      circumstance or on any future occasions and Borrowers shall, upon demand
      by Lender, which may be made at any time or from time to time, immediately
      repay to Lender the

                                       4
<PAGE>

      entire amount of any such excess(es) for which payment is demanded.

            (f) Section 4 of the Loan Agreement is amended by adding the
following as Section 4.3 to be inserted following Section 4.2 thereof:

            4.3 Conditions Precedent to Special Supplemental Loans. In addition
      to the conditions precedent contained in Section 4.2 applicable to all
      Loans and Letter of Credit Accommodations, each of the following is an
      additional condition precedent to Lender making any Special Supplemental
      Loan to any Borrower hereunder:

            (a) Lender shall have received the Participation Agreement, duly
      executed and delivered by GSCP in form and substance satisfactory to
      Lender and the Participation Agreement shall be in full force and effect;

            (b) after giving effect to such Special Supplemental Loan, the
      outstanding principal balance of the Special Supplemental Loans will be
      equal to or less than the outstanding Participant's Interest and will not
      exceed the Maximum Credit applicable to Special Supplemental Loans; and

            (c) Lender and the Participant shall have received a certificate
      from an authorized officer of Borrowers' Representative, in form and
      substance satisfactory to Lender, certifying that the conditions set forth
      herein to the making of the Special Supplemental Loans have been complied
      with.

            (g) Section 6.6 of the Loan Agreement is amended by inserting the
following after the last sentence thereof:

      Notwithstanding the foregoing, Borrowers shall use the proceeds of Special
      Supplemental Loans solely (i) to pay insurance premiums (and to fund
      initial premium deposits in connection with obtaining insurance coverage
      and to fund loss funds required by insurance carriers to be established
      prospectively at the time of the renewal of insurance coverage) and
      otherwise for working capital purposes, (ii) to pay interest on the
      Special Supplemental Loans, (iii) for expenditures of Borrowers in the
      ordinary course of Borrowers' business not otherwise permitted in this
      sentence; provided that no single expenditure shall exceed $20,000 for any
      Special Supplemental Loan or $200,000 in the aggregate as to all such
      expenditures, (iv) to pay costs, expenses and fees in connection with (A)
      the placement, preparation, negotiation, execution and delivery of the
      Fourth Amendment to Loan Agreement dated as of March 1, 2002 (the "Fourth
      Amendment") and the Participation Agreement, and (B) the solicitation of
      consents under the Indenture governing the Senior Notes to permit the
      Fourth Amendment and the Participation Agreement, or (v) for such other
      purposes as

                                       5
<PAGE>

      the Participant shall consent from time to time; and, without limiting the
      generality of the foregoing limitation, except with the consent of the
      Participant, Special Supplemental Loans shall not be made or used to fund
      or repay any other Loans or Obligations.

            (h) Section 9.12 of the Loan Agreement is amended and restated in
its entirety to read as follows:

      9.12 Transactions with Affiliates. Neither Parent nor any Borrower shall,
      or permit its Subsidiaries to, enter into any transaction for the
      purchase, sale or exchange of property or the rendering of any service to
      or by any affiliate, except (a) in the ordinary course of and pursuant to
      the reasonable requirements of Parent's or such Borrower's or Subsidiary's
      business and upon fair and reasonable terms no less favorable to Parent or
      such Borrower or Subsidiary than it would obtain in a comparable arm's
      length transaction with an unaffiliated person; (b) existing and future
      employment agreements entered into by Parent or any Subsidiary of Parent
      in the ordinary course of business with the approval of a majority of the
      disinterested members of Parent's Board of Directors; (c) transactions
      between or among Parent, Borrowers, and Guarantors; (d) reasonable and
      customary fees and compensation paid to and indemnity provided on behalf
      of, officers, directors, employees or consultants of the Parent or any
      Subsidiary of Parent as determined in good faith by a majority of the
      disinterested directors of Parent's Board of Directors or, if none,
      unanimously by such Board of Directors; (e) the "Park & Ride Lease"
      between Showplace Bowling Center Inc., as lessor, and Atlantic Express
      Coachway Inc., as lessee, and the lease between Dom Rich Associates, Inc.,
      as lessor, and Staten Island Bus Inc., as lessee, in each case as in
      effect of the date hereof; (f) annual premiums paid to Atlantic North in
      the ordinary course of business for insurance, provided, that such
      premiums do not exceed the annual aggregate deductibles on Parent's
      insurance policies then in effect; and (g) the transactions contemplated
      by the Participation Agreement or in connection with any Special
      Supplemental Loans (whether made directly pursuant to the Participation
      Agreement or otherwise made directly to Borrowers).

            (i) Section 9.13 of the Loan Agreement is amended and restated in
its entirety to read as follows:

      9.13 Adjusted Net Worth. At the end of each fiscal quarter, beginning with
      the quarter ending March 31, 2002, Parent shall maintain Adjusted Net
      Worth of not less than $42,000,000.

            (j) Section 10.1(i) of the Loan Agreement is amended and restated in
its entirety to read as follows:

                                       6
<PAGE>

                  (i) Any Event of Default, or event which with notice or the
            passage of time or both, would become an Event of Default, under and
            as defined in the Indenture (provided that, a default under Section
            6.1(1) of the Indenture shall not constitute an Event of Default
            hereunder unless and until such default continues for more than the
            applicable cure period with respect thereto), or any agreement
            securing or guaranteeing payment of the Senior Notes, or (ii)
            default by any Borrower, any Subsidiary of a Borrower or any Obligor
            under any agreement, document or instrument relating to any other
            indebtedness for borrowed money owing to any person other than
            Lender, or any capitalized lease obligations, contingent
            indebtedness in connection with any guarantee, letter of credit,
            indemnity or similar type of instrument in favor of any person other
            than Lender, in any case in an amount in excess of $500,000, which
            default continues for more than the applicable cure period, if any,
            with respect thereto, or any default by any Borrower, any such
            Subsidiary or any Obligor under any material contract, lease,
            license or other obligation to any person other than Lender, which
            default continues for more than the applicable cure period, if any,
            with respect thereto;

      2. Conditions Precedent. The agreements set forth herein shall become
effective only if and when the following conditions precedent have been
satisfied as determined by Lender:

            (a) each of Borrowers shall have executed and delivered to Lender
this letter;

            (b) Lender shall have received, in form and substance satisfactory
to Lender, the opinion of Latham & Watkins as to the satisfaction of all
conditions precedent to the effectiveness of the Eighth Supplemental Indenture
(the "Supplemental Indenture") dated as of March 1, 2002, including without
limitation, the consent of the requisite percentage of the holders of the Senior
Notes to such amendments and such other matters as Lender may request;

            (c) Lender shall have received evidence satisfactory to it that the
requisite number of holders of the Senior Notes have consented, in a manner
acceptable to Lender, to the terms and conditions of the Supplemental Indenture
and the transactions contemplated thereby, and such supplemental indenture and
other amendments shall have been executed and delivered and be in full force and
effect and all conditions precedent to the effectiveness thereof shall have been
satisfied;

            (d) Lender shall have received an amendment to the Intercreditor
Agreement amending the term "Priority Amount" therein to include the Special
Supplemental Loans made hereunder, and otherwise in form and substance
satisfactory to Lender, duly executed by the collateral agent for the holders of
the Senior Notes, and in full force and effect;

            (e) each of Borrowers shall have delivered to Lender copies of
requisite corporate action and proceedings in connection with this letter, in
form and substance satisfactory to Lender and, where requested by Lender or
Lender's counsel, certified by appropriate corporate officers or governmental
authorities;

                                       7
<PAGE>

            (f) each of the representations and warranties of Borrowers set
forth in the Loan Agreement and each of the other Financing Agreements is true
and correct in all material respects as of such date; and

            (g) immediately prior to, and immediately after giving effect to,
the amendments and agreements set forth herein, there shall exist no Event of
Default or event or condition which, with the giving of notice or the passage of
time or both, would constitute an Event of Default.

      3. Real Property. Within a reasonable period of time following the date
hereof, as determined by Lender, Borrowers shall deliver or cause to be
delivered to Lender, in form and substance satisfactory to Lender, (i)
appraisals of all of the Real Property located in the State of New York
appraised by appraisers satisfactory to Lender, and (ii) in connection with each
of the Mortgages, a valid and effective title insurance policy issued by a
company and agent acceptable to Lender (A) insuring the priority, amount and
sufficiency of the Mortgages, (B) insuring against matters that would be
disclosed by surveys and (C) containing any legally available endorsements,
assurances or affirmative coverage requested by Lender for protection of its
interests. Borrowers acknowledge and agree that the failure to provide the
foregoing will constitute an Event of Default and Lender may exercise its
remedies set forth in this Loan Agreement and/or establish Availability Reserves
in amounts and upon terms and conditions to be determined by Lender in its sole
discretion. Borrowers further agree, upon Lender's request, to execute and
deliver (or cause to be executed and delivered) such amendments to the Mortgages
relating to Real Property located in the State of New York and to take or cause
to be taken such other action as may be necessary or desirable to increase the
amount secured by such Mortgages up to an amount that is equal to eighty-five
(85%) percent of the appraised value of such Real Property.

      4. No Other Modification. Except as expressly set forth herein, the
Financing Agreements are not amended or otherwise affected in any way by this
letter and continue in full force and effect.

      5. No Waiver of Compliance. By entering into this letter, Lender has not
and shall not be deemed to have (a) waived any Event of Default now existing or
which may occur at any time hereafter or (b) limited any of Lender's rights and
remedies with respect to any Event of Default or (c) except as otherwise
expressly set forth herein, limited Lender's right to require Borrowers to
comply strictly with each term and condition of the Financing Agreements.

      6. This Letter a Financing Agreement. This letter constitutes one of the
Financing Agreements and is subject to all of the provisions of the Loan
Agreement applicable to the Financing Agreements.

      7. Fees and Expenses. In consideration of Lender's agreements contained
herein and in order to induce Lender to enter into this letter, Borrowers shall
herewith pay Lender a fee of $300,000, which Lender is authorized to charge to
Borrowers' loan account with Lender. Borrowers confirm that, under the Loan
Agreement, it shall pay Lender's attorneys' fees and expenses incurred in
connection with this letter and the transactions contemplated hereby.

                                       8
<PAGE>

      8. Ratification.

            (a) Except as expressly set forth herein, the Loan Agreement and the
other Financing Agreements are not modified hereby and each shall remain in full
force and effect in accordance with the respective provisions thereof on the
date hereof, and the Loan Agreement and the other Financing Agreements are each
in all respects ratified and affirmed. Lender's agreements herein shall not be
construed to require Lender to make or permit any other supplemental loans or
make any other amendments not expressly contemplated by the Loan Agreement on
any other occasion, regardless of the similarity of circumstances.

            (b) Guarantors hereby (i) acknowledge notice of the terms and
conditions of this letter, (ii) confirm and agree that the Guaranteed
Obligations under and as defined in the Guarantee, includes all Borrowers'
Obligations for or in respect of the principal of, accrued interest in, and
other charges now or hereafter payable in connection with the Loans, including,
without limitation, those made or continuing after giving effect to the
amendments in this letter, and (iii) confirm that, after giving effect to this
letter and to the making of the amendments to the Loan Agreement provided
herein, the Guaranty is each of their valid and binding obligation, enforceable
against each of them in accordance with its terms, without defenses, offsets, or
counterclaims, and continues in full force and effect.

      9. Representations and Warranties. Without limiting any other provision of
this letter, and as an inducement to Lender to enter into this letter, each
Borrower hereby: (a) represents, warrants and agrees that the Loan Agreement and
the other Financing Agreements are its valid and binding obligations enforceable
against it in accordance with their terms, without the right to interpose any
claims, deductions, offsets or counterclaims of any nature (other than
compulsory counterclaims); and (b) represents and warrants that:

            (i)   each of the representations and warranties of Borrowers set
                  forth in the Loan Agreement and the other Financing Agreements
                  is true and correct in all material respects, as of the date
                  hereof; and

            (ii)  after giving effect to this letter, no Event of Default, or
                  event or condition which with notice or the passage of time or
                  both would become an Event of Default, has occurred and is
                  continuing.

      10. Governing Law. This letter shall be construed in accordance with and
be governed by the laws (without giving effect to the conflicts of laws
principles that would require the application of the laws of a different
jurisdiction) of the State of New York.

      11. Counterparts. This letter may be executed in one or more counterparts,
and by Lender and each other party hereto in separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                                       9
<PAGE>

      Please indicate Borrowers' agreement to the terms of this letter by
countersigning it in the space provided below and returning it to Lender.

                                       Very truly yours,

                                       CONGRESS FINANCIAL CORPORATION

                                       By:    /s/ Herb C. Korn
                                              ---------------------------------
                                       Name:  Herb C. Korn
                                       Title: Vice President

Accepted and Agreed:

BORROWERS

ATLANTIC EXPRESS
  TRANSPORTATION CORP.
AMBOY BUS CO., INC.
ATLANTIC-CHITTENANGO REAL
  PROPERTY CORP.
ATLANTIC-CONN. TRANSIT, INC.
ATLANTIC EXPRESS COACHWAYS,
  INC.
ATLANTIC-HUDSON, INC.
ATLANTIC MEDFORD INC.
ATLANTIC PARATRANS, INC.
ATLANTIC PARATRANS OF
  KENTUCKY, INC.
BLOCK 7932, INC.
ATLANTIC EXPRESS OF MISSOURI
  INC.
ATLANTIC EXPRESS OF
  PENNSYLVANIA, INC.
BROOKFIELD TRANSIT, INC.
COURTESY BUS CO., INC.
GVD LEASING, INC.
180 JAMAICA CORP.
K. CORR, INC.
JERSEY BUSINESS LAND CO., INC.
MERIT TRANSPORTATION, CORP.
METRO AFFILIATES, INC.
METROPOLITAN ESCORT SERVICE,
  INC.
MIDWAY LEASING, INC.
RAYBERN BUS SERVICE, INC.
RAYBERN CAPITAL CORP.
RAYBERN EQUITY CORP.
STATEN ISLAND BUS, INC.

                                       10
<PAGE>

ATLANTIC EXPRESS OF L.A., INC.
CENTRAL NEW YORK COACH SALES
  AND SERVICE, INC.
JERSEY BUS SALES, INC.
WRIGHTHOLM BUS LINE INC.
ATLANTIC PARATRANS OF
  COLORADO, INC.
ATLANTIC PARATRANS OF
  PENNSYLVANIA, INC.
ATLANTIC EXPRESS OF
  NEW JERSEY, INC.
ATLANTIC PARATRANS OF
  ARIZONA, INC.
TEMPORARY TRANSIT SERVICE,
  INC.
201 WEST SOTELLO REALTY, INC.
ATLANTIC TRANSIT, CORP.
AIRPORT SERVICES, INC.
ATLANTIC EXPRESS NEW ENGLAND,
  INC.
ATLANTIC EXPRESS OF
  CALIFORNIA, INC.
ATLANTIC EXPRESS OF
  ILLINOIS, INC.
ATLANTIC EXPRESS OF
  SOUTH CAROLINA, INC.
FIORE BUS SERVICE, INC.
GROOM TRANSPORTATION, INC.
JAMES MCCARTY LIMO SERVICE,
  INC.
MCINTIRE TRANSPORTATION, INC.
MOUNTAIN TRANSIT, INC.
R. FIORE BUS SERVICE, INC.
ROBERT L. MCCARTHY & SON, INC.
T-NT BUS SERVICE, INC.
TRANSCOMM, INC.
WINSALE, INC.
ATLANTIC PARATRANS OF NYC, INC.

By:    /s/ Alan Rubinfeld
       -------------------------------
Title: Chief Financial Officer of each of the
       Companies Listed above

Chief Executive Office
7 North Street
Staten Island, New York 10302

                                       11Exhibit 10.10

                                                            [LOGO] STRINGER SAUL
                                                                   -------------

                             DATED December 10, 2001

                               (1) SKYEPHARMA INC

                                       and

                              (3) ASTRALIS LIMITED

                      ------------------------------------
                                  AGREEMENT FOR
                                    SERVICES
                      ------------------------------------

                        17 Hanover Square London W1S 1HU
                      Tel: 020 7917 8500 Fax: 020 7917 8555
<PAGE>

                                      INDEX

                                                                         Page No
 1         Interpretation                                                      1
 2         Appointment                                                         6
 3         Joint Project Team                                                  6
 4         Clinical Services                                                   8
 5         Regulatory Services                                                 9
 6         Development Services                                               10
 7         Changes to the Services                                            10
 8         Investor Relations                                                 11
 9         Confidentiality                                                    11
10         Ownership of Materials and Inventions                              13
11         Fees and Budgets                                                   14
12         Relationship of Parties                                            15
13         Indemnities                                                        16
14         Duration and Termination                                           16
15         Force Majeure                                                      17
16         Consequences of Termination                                        17
17         Assignment                                                         18
18         Entire Agreement Modification and Waiver                           18
19         Notices                                                            18
20         Governing Law and Jurisdiction                                     19
21         Severance of Illegal Terms                                         19
22         Counterparts                                                       20
23         Publicity                                                          20

           Schedule 1: Services
           Schedule 2: Laboratory
           Schedule 3: Timetable
           Schedule 4: Attachments    1. Study Protocol
<PAGE>

THIS AGREEMENT is made the 10th day of December 2001

BETWEEN:

(1)   SkyePharma  Inc a US company  having its  principal  place of  business at
      10450   Science   Centre  Drive,   San  Diego,   California   92121,   USA
      ('Contractor').

(2)   Astralis  Limited,  a company  registered  in Delaware  with its principal
      place of business and registered  office at 135 Columbia  Turnpike - Suite
      301 Florham Park - New Jersey 07932, USA ('Company').

Whereas:

(A)   Company  is a start-up  phase  biotechnology  company  formed to engage in
      research and  development  of treatments  for immune system  disorders and
      skin diseases

(B)   Contractor is engaged in development,  manufacture,  distribution and sale
      of  pharmaceutical  and other health care  products and is also engaged in
      providing certain development and related clinical trial services.

(C)   Company  wishes  to  engage  Contractor  to  carry  out the  Services  (as
      hereinafter defined) upon the terms and conditions below and Contractor is
      willing and has agreed to perform such Services.

THE PARTIES HEREBY AGREE as follows:

1     Interpretation

1.1   In this Agreement including the recitals hereto, the following terms shall
      have  the  respective  following  meanings  unless  the  context  requires
      otherwise:

      'Guidelines'                    those guidelines regarding compensation to
                                      volunteers and Subjects in clinical trials
                                      as  might  be  recognised   and  generally
                                      applied  in any  territory  where  a Study
                                      contemplated herein is carried out;

      'Affiliate'                     any  corporation,   partnership  or  other
                                      entity controlled by, controlling or under
                                      common control with Company with 'control'
                                      meaning  direct  or  indirect   beneficial
                                      ownership  of more than 50% of the  voting
                                      power of or more than 50%  interest in the
                                      income of such corporation,
<PAGE>

                                      partnership or other entity (in accordance
                                      with Section 736 of the English  Companies
                                      Act 1985 as amended by the  Companies  Act
                                      1989);

      'Budget'                        the budget for performance of the Services
                                      as may require to be agreed by the parties
                                      in accordance herewith;

      'Change Order'                  a  document  detailing  a  change  to  the
                                      Services,   Budget  or  any  other  matter
                                      hereunder made in accordance with clause 7
                                      and/or clause 11;

      'Confidential Information'      any information,  oral, visual or written,
                                      that is not generally known outside of one
                                      party or its Affiliates  acquired directly
                                      or  indirectly  by  the  other  party  its
                                      agents  or  employees   and  whether  made
                                      available  directly or indirectly by or on
                                      behalf  of the first  party or  developed,
                                      generated  or derived by the other  party,
                                      CROs, Monitors,  Investigators or Subjects
                                      in the course of and relating to the Study
                                      or as the case may be,  in the  course  of
                                      providing  the  Services  including,   but
                                      without limitation:

                                      i)    information relating to a party's or
                                            its Affiliates' existing or proposed
                                            products,    designs,   methods   of
                                            manufacture,  research,  technology,
                                            know-how,    processes,    practices
                                            and/or  business  operations such as
                                            marketing plans,  customer lists and
                                            pricing methods, finances as well as
                                            personnel and organisational data;

                                      ii)   results   and   other    information
                                            resulting   from  any   Study,   the
                                            content  of  any  report  or  advice
                                            prepared   by   or  on   behalf   of
                                            Contractor  hereunder,  and  working
                                            papers in relation thereto;

                                      iii)  information embodied in Materials.

      'CRF'                           a case record form able to record all data
                                      required  by a Protocol  relative  to each
                                      Subject and approved by Company for use in
                                      a Study;

      'CRO'                           a clinical research organisation (being an
                                      independent  third party  experienced  and
                                      equipped  to conduct  clinical  trials and
                                      related  services)  advised by Contractors
                                      to the  Company as being able to conduct a
                                      Study;

                                       2
<PAGE>

      'EMEA'                          the European  Agency for the Evaluation of
                                      Medicinal  Products  or its  successor  in
                                      title;

      'Ethics Committee'              the   body   defined   in  ICH  GCP   with
                                      responsibility    for    observance    and
                                      maintenance  of ethical  standards  at the
                                      Study Site, and whether  locally  referred
                                      to   as   an    Ethics    Committee,    an
                                      Institutional    Review   Board   or   the
                                      equivalent  body  in  the  country  of the
                                      Study  Site;

      'FDA'                           the   United    States   Food   and   Drug
                                      Administration or its successor in title;

      'ICH GCP'                       ICH Harmonised  Tripartite Guide Lines for
                                      Good  Clinical  Practice  dated 1 May 1996
                                      (effective  17  January  1997) or  updated
                                      subsequently  and GCP shall be interpreted
                                      accordingly;

      'IND'                           an  Investigational  New Drug  Application
                                      filed with the FDA,  the EMEA or any other
                                      regulatory  approval  that may be required
                                      to be issued in order to  commence a Study
                                      in any country;

      'Improvement'                   any  improvement,  invention  or discovery
                                      conceived,    originated    or   made   by
                                      Contractor  or its  directors or employees
                                      whether  alone or jointly  with others and
                                      arising   wholly  or  partly  out  of  the
                                      activities undertaken during the course of
                                      and/or in any way  whatsoever  related  to
                                      the provision of the Services;

      'Investigator(s)'               those     persons     with     appropriate
                                      qualifications and experience  selected by
                                      CRO  as  able  to  conduct  the  practical
                                      performance   of  the   Study  in   strict
                                      compliance  with  the  Protocol  including
                                      responsibility  for the integrity,  health
                                      and  welfare  of the  Subjects  during the
                                      Study   and   to   exercise    all   other
                                      responsibilities     of     a     clinical
                                      investigator set out in ICH GCP;

      'Investigator Fee' Schedule'    the  budget for  payment of  Investigators
                                      based   on   Subject   recruitment/visits/
                                      completion  of evaluable  CRFs, as set out
                                      in the Budget;

      'Laboratory'                    the  company  engaged  by CRO  to  provide
                                      laboratory services as required during the
                                      Study;

                                       3
<PAGE>

      'Materials'                     documents,  products,  drawings,  designs,
                                      models, records,  reports,  correspondence
                                      (electronic or otherwise)  specifications,
                                      disks,   tapes  and  all  other   tangible
                                      materials;

      'Monitor'                       Contractor  personnel who will monitor the
                                      performance of the Study at the Study Site
                                      including  support  staff  of the same and
                                      all other personnel  engaged by Contractor
                                      to  assist  in  the   performance  of  the
                                      Services;

      'Net Sales'                     means the invoiced amount billed for sales
                                      of products  utilising  the  Technology to
                                      third party purchasers, less the following
                                      items  to the  extent  they  are  paid  or
                                      allowed and included in the invoice price:

                                      (i)   quantity,    trade    and/or    cash
                                            discounts actually granted;

                                      (ii)  amounts  refunded  or  credited  for
                                            Products   which  were  rejected  or
                                            damaged;

                                      (iii) taxes,  tariffs,  customs duties and
                                            surcharges  and  other  governmental
                                            charges  incurred in connection with
                                            the sale, exportation or importation
                                            of such products;

      'NDA'                           a new drug  application  or its equivalent
                                      filed   with   the   FDA,   a    marketing
                                      authorisation  application  filed with the
                                      EMEA   or   a   marketing    authorisation
                                      application    or   a   product    licence
                                      application  or  equivalent  filed  in any
                                      other country;

      'Pre-Clinical Study'            means  any  study,  other  than  a  Study,
                                      carried out on Product including,  without
                                      limiting the  generality of the foregoing,
                                      ADME,    toxicology,     pharmacokinetics,
                                      pathology,   pharmaceutical   formulation,
                                      drug     metabolism,     stability     and
                                      pharmacology studies which are required or
                                      advisable  to be  carried  out in order to
                                      obtain  the  grant  of an IND  to  develop
                                      Product;

      'Project Manager'               the person to be appointed  by  Contractor
                                      in accordance with clause 3 to oversee the
                                      conduct of the Services;

      'Protocol'                      the    statement    of   the    rationale,
                                      objectives,  design and methodology of any
                                      Study including the conditions under which
                                      it is  to  be  performed  which  shall  be
                                      agreed   between  the  parties   following
                                      execution of this

                                       4
<PAGE>

                                      Agreement  and attached to this  Agreement
                                      at Schedule 4;

      'Regulatory Authority'          any  statutory or  governmental  body with
                                      responsibility  in  relation  to  clinical
                                      trials  conducted or empowered to regulate
                                      the dissemination, importation, production
                                      or use of the Study Drug at the Study Site
                                      or  elsewhere  in   accordance   with  the
                                      Protocol and  references  to  'regulatory'
                                      shall be interpreted accordingly;

      'Services'                      those Clinical Trial Services,  Regulatory
                                      Services and Development Services and such
                                      other related  advice and assistance to be
                                      provided by  Contractor  for and on behalf
                                      of  Company  as   specified  or  described
                                      herein;

      'Standards'                     ICH GCP,  Declaration  of  Helsinki  (18th
                                      World  Medical   Assembly  1964)  as  last
                                      modified   by  the  52nd   World   Medical
                                      Assembly  Edinburgh Scotland October 2000,
                                      all applicable national and/or local laws,
                                      regulations and guidelines relating to the
                                      protection   of  human   subjects  in  the
                                      conduct of clinical trials,  all legal and
                                      administrative    requirements    of   the
                                      Regulatory Authority relating to the Study
                                      Drug, Good Laboratory Practices as set out
                                      in the UK Compliance Program DoH, 1989 and
                                      US Code of Federal  Regulations  21,  Part
                                      58;

      'Study'                         the  clinical  investigation  performed as
                                      described  in  the  final  version  of the
                                      Protocol;

      'Study Costs'                   the  actual  cost to  Contractor  of those
                                      items  contained  in the Budget as payable
                                      by  Contractor  to third  parties for such
                                      specified goods and services  necessary to
                                      conduct the Study;

      'Study Drug'                    the  investigational  drug(s) specified in
                                      the Protocol including active and inactive
                                      preparations   and   investigational   and
                                      standard devices all placebo and reference
                                      compounds;

      'Study Report'                  the final version of the report  detailing
                                      the  conduct  and  results  of  the  Study
                                      including  all  statistical  analysis  and
                                      reports  which has been  agreed by Company
                                      and  is  suitable  for  submission  to the
                                      Regulatory  Authority  and  to  which  the
                                      Protocol shall be appended;

      'Study Site'                    a   hospital,   clinic   or  office  of  a
                                      practising  physician  selected by CRO and

                                       5
<PAGE>

                                      approved   in   writing   by   Company  to
                                      participate  in the  conduct of the Study,
                                      and  from  which  the  Investigator   will
                                      conduct the practical  performance  of the
                                      Study;

      'Subject'                       any  person  eligible   according  to  the
                                      criteria in the Protocol (excluding screen
                                      failures) for recruitment,  inclusion (and
                                      not   for    exclusion)    and   continued
                                      participation  in the  Study  and  who has
                                      signed  an  appropriate  informed  consent
                                      form and who is  enrolled  to take part in
                                      the Study;

1.2   In this Agreement the headings and table of contents are included only for
      convenience and shall not affect its  interpretation and where the context
      so  admits:  reference  to a person  shall be deemed to  include a natural
      person, body corporate or incorporate,  government or department or agency
      thereof or any other legal entity;  words  importing the singular  meaning
      include the plural and vice versa; and reference to the masculine includes
      the  feminine  and vice versa;  also  reference  to a clause,  Schedule or
      attachment  shall mean a clause in or a  Schedule  or  attachment  to this
      Agreement  and  the  provisions  of the  Schedules  and  of the  documents
      referred to in the  Schedules/attachments  (including without  limitation,
      the Protocol) shall be deemed terms of this Agreement.

1.3   Any word or expression  defined in the Protocol and used herein shall bear
      the same meaning unless the context otherwise requires.  In the event of a
      conflict  between any provisions in a Schedule and any term in the body of
      this Agreement, the provisions of the Protocol shall prevail in respect of
      any clinical or technical aspect of the conduct of the Study otherwise the
      terms in the body of this Agreement  shall apply in  substitution  for the
      conflicting provision.

2     Appointment

2.1   Company hereby  engages  Contractor to provide the Services and Contractor
      hereby  accepts the  engagement  and agrees to perform the Services and to
      conduct such other  functions  for and on behalf of Company in  accordance
      with and subject to the terms and conditions of this Agreement.

3     Joint Project Team and Project Manager

3.1   Within thirty (30) days of the date hereof,  the parties  shall  establish
      the  Joint  Project  Team  containing   senior  clinical  research  and/or
      regulatory members from both parties. The Joint Project Team shall consist
      of four (4) members,  two (2) from each party.  Each party shall designate
      its members to the Joint  Project Team and shall notify the other party in
      writing if it  substitutes  or replaces any of its  members,  whether on a
      permanent or temporary basis.

                                       6
<PAGE>

3.2   The Contractor  shall appoint the Project  Manager,  who shall be a senior
      clinical  research and/or regulatory  employee of the Contractor,  and who
      may be a member of the Joint Project Team.

3.3   The Joint  Project Team  together  with the Project  Manager shall meet at
      least  four (4) times per year  unless  otherwise  agreed by the  parties.
      Meetings  may be held by telephone  or video  conference  or in person and
      members may  participate in any of the foregoing ways it being  recognised
      that it is the current  intention  that the Joint Project Team should meet
      in person at least  twice a year,  at venues to be agreed by the  parties.
      All costs  relating to  participation  by each member in the activities of
      the Joint Project Team shall be borne by the party appointing such member.

3.4   The  presence  of at  least  two (2)  members,  one (1) from  each  party,
      including the Project  Manager,  shall constitute a quorum for the purpose
      of  consideration  and action by the Joint Project Team.  Where necessary,
      decisions of the Joint  Project Team shall be put to the vote.  Each party
      shall have one (1) vote,  irrespective  of the number of attendees at such
      meeting.  Any  deadlock  on any such vote shall be  referred  to the Chief
      Executive  Officer of the  Company  who shall have the  casting  vote,  or
      failing his  decision,  the board of directors  of the Company,  who shall
      have the casting vote.

3.5   The Joint Project Team shall keep minutes of meetings and circulate  these
      to the members  within  fifteen (15) days  following the conclusion of the
      meeting for approval and adoption.

3.6   The Project  Manager shall update the Company with progress on the Project
      on a monthly  basis,  and will provide the Company  with a written  report
      following, and in respect of, each Joint Project Team meeting.

3.7   Additional  non-voting  representatives  or consultants  may be invited by
      either party to attend and participate in Joint Project Team meetings (for
      example,  to evaluate and advise on business or scientific issues) subject
      to compliance with the confidentiality provisions of Clause 10. Each party
      shall be  responsible  for the costs and expenses  incurred in  connection
      with the  attendance and  participation  in Joint Project Team meetings of
      representatives or consultants invited by such party.

3.8   The Joint  Project  Team shall be  responsible,  without  limitation,  for
      monitoring and co-ordinating  certain of the parties' activities regarding
      the conduct of the Services.

3.9   The Joint Project Team shall remain in existence  until the termination of
      the Agreement or until disbanded by agreement of the parties.

                                       7
<PAGE>

4     Clinical Services

4.1   Contractor  shall use all  reasonable  endeavours  to perform the Clinical
      Services, which shall comprise the following:

      4.1.1     managing  and  administering  clinical  trials  in the US and in
                Europe as appropriate;

      4.1.2     collaborating with the Company in selecting a CRO with which the
                Client shall contract direct;

      4.1.3     managing  and  directing  the  activities  of the  chosen CRO in
                conduct of the Study;

      4.1.4     monitoring  Subject  enrolment  to ensure  as far as  reasonably
                possible that the project timelines for enrolment are met;

      4.1.5     reviewing the CRO's Voice  Activated  Response System (VARS) and
                advising the Company of its apparent suitability;

      4.1.6     providing  assistance  and  direction  to recruit and qualify an
                Investigator  capable  of  conducting  a  Study,  with  whom the
                Company shall contract direct;

      4.1.7     managing  the  development  of  the   Investigator's   brochure.
                Contractor  will  also  schedule  and  run  the   Investigator's
                meetings at appropriate times throughout the Study;

      4.1.8     managing the process of Study Site selection,  assisting Company
                with  negotiating  Study Site  contracts,  qualifying  the Study
                Sites  and  co-ordinating  with  the  CRO the  activities  to be
                undertaken at the Study Site;

      4.1.9     providing  input and  expertise in the design of the Protocol to
                the Company's specifications, such input to include Study design
                criteria  such as packaging and dosage in  conjunction  with the
                Company's packaging contractor;

      4.1.10    arranging  for an  indemnity  by  Company  of  Study  Sites  and
                procuring  clinical  trial  insurance  in  an  amount  of  cover
                mutually agreeable to the parties. Company shall contract direct
                with Study Sites  regarding  such  indemnity and shall  contract
                direct  with  the  relevant  insurers  for such  clinical  trial
                insurance.;

      4.1.11    providing a qualified medical doctor to co-ordinate and lead the
                Tolerance Assessment Panel (TAP) on behalf of the Company;

                                       8
<PAGE>

      4.1.12    providing  such  other  necessary   clinical   services  as  may
                reasonably be required with the aim of completing the Chemistry,
                Manufacturing  and Controls  (CMC)  section of any IND for Study
                Drugs.

4.2   The parties shall agree a timetable for  implementation  and completion of
      any Study  and  Contractor  shall use  reasonable  endeavours  to  procure
      compliance by the CRO with the same.

4.3   Contractor  shall  report to Company  regarding  progress of the  Services
      regularly as required but at least  monthly as specified in Schedule 1 and
      shall before the Completion of the Services use  reasonable  endeavours to
      procure the provision by the CRO of a management  report to Company of any
      Study  specifying  in  respect  of each Study Site that the Study has been
      completed in accordance with the Protocol and that CRO has overseen and is
      satisfied  that all data  collected  in  relation  to the  Study  has been
      properly  recorded on the CRFs in accordance with the  requirements of the
      Protocol and that CRO is satisfied that the production of the  statistical
      tabulations has all been completed in compliance with ICH GCP.

4.4   Company shall make available to Contractor  clinical supplies of the Study
      Drug for  onward  despatch  to the CRO and  Investigator  and  such  other
      materials  facilities,  equipment and  information  as may be in Company's
      possession  from  time to time  and  which  Company  considers  reasonably
      necessary to the conduct of the Study or to assist in the  performance  of
      the Services.

5     Regulatory Services

5.1   Contractor  shall use all reasonable  endeavours to perform the Regulatory
      Services, which shall comprise the following:

      5.1.1   managing the process of obtaining an IND to conduct Studies in the
              United States and Europe;

      5.1.2   providing,  on behalf of the Company  which shall be the holder of
              the IND for the Product:

              5.1.2.1   guidance and  preparation for the IND and NDA (including
                        the preparation of the  manufacturing and CMC section of
                        an IND);

              5.1.2.2   guidance for an NDA submission by Company as required by
                        Company;

              5.1.2.3   co-ordination  of the  regulatory  requirements  for the
                        Company;

                                       9
<PAGE>

      5.1.3   updating the IND on behalf of Company for any formulation  changes
              which may occur to the Study Drug covered by the IND.

6     Development Services

6.1   Contractor shall use all reasonable  endeavours to perform the Development
      Services, which shall comprise the following:

      6.1.1   providing drug development expertise (which expertise shall, where
              Company  has  exercised  its option  under the  Technology  Access
              Option Agreement of even date herewith and between,  among others,
              Contractor  and  Company  ("the  Technology  Agreement"),  include
              application of Contractor's drug delivery expertise) to assist the
              transfer of  technology  to enable  pilot-scale  manufacturing  by
              third  party  manufacturers  and  conducting  feasibility  studies
              including all analytical and stability analysis in preparation for
              the  Product  to enable  transition  to  development  studies  and
              commercial scale manufacturing;

      6.1.2   assisting  in the  identification  and  selection of a third party
              toll manufacturer  capable of manufacturing  and/or assembling the
              Product,  including  appropriate  due diligence of the prospective
              manufacturer's ability and facilities;

      6.1.3   notwithstanding the provisions of clauses 6.1.1 and 6.1.2, Company
              shall consider in good faith any offer by Contractor to provide to
              the   Company   such   pilot-scale   manufacturing   and/or   toll
              manufacturing  services, upon such commercial terms as the parties
              may agree.

7     Changes to the Service

7.1   Any material  change to the  Services to be  conducted  by the  Contractor
      shall be agreed between the parties.

7.2   Any change to the Protocol shall be documented and dated so that it can be
      uniquely  identified as an amendment.  Upon receiving a Protocol amendment
      (or an amended Protocol as the case may be) Contractor will use reasonable
      endeavours   to  procure  that  the  CRO  shall   complete  all  necessary
      documentation  to support an  application  for approval of the same to the
      Ethics Committee and, if costs are to be incurred, these will be agreed by
      the  parties  in  writing  prior to any  such  submission  and  thereafter
      Contractor  will use  reasonable  endeavours  to procure  that the amended
      Protocol   is   provided  by  the  CRO  to  and  signed  by  each  of  the
      Investigators.

                                       10
<PAGE>

7.3   Contractor  shall advise CRO to proceed with any change to the Services as
      specified in a written Change Order signed by the parties.

8     Investor Relations

8.1   The Contractor will provide reasonable  investor relations services to the
      Company in respect of the Company's European operations in accordance with
      a schedule  of  services  to be agreed by the  parties  on or before  31st
      December 2001 for the year commencing 1st January 2002. All external costs
      and expenses  incurred by the  Contractor in providing such services shall
      be the  responsibility  of the  Company  and  shall be  reimbursed  to the
      Contractor upon presentation of valid invoices therefor.

9     Confidentiality

9.1   Each party ('the Recipient')  agrees to receive and maintain  Confidential
      Information of the other ('the  Discloser') in strict confidence and shall
      not without the prior written consent of the Discloser publish or disclose
      Confidential  Information  of the  Discloser  to anyone  (nor  allow  such
      publication or disclosure)  except such  Confidential  Information to such
      persons as may be expressly  authorised in accordance with this Agreement.
      Therefore the Recipient shall:

      9.1.1   use  Confidential  Information  for the sole purpose of the proper
              performance  of their duties in relation to this  Agreement and in
              accordance with such directions as Discloser may give from time to
              time and not for any other purpose;

      9.1.2   restrict access to Confidential  Information and allow access only
              to CROs,  Monitors and  Investigators  and those other (if any) of
              its directors, employees, contractors, affiliates and agents, that
              must use such part of the Confidential Information for the purpose
              of the conduct of the Study or the performance of the Services and
              who have been  advised  of the  restrictions  hereby  accepted  by
              Recipient in relation to the Confidential Information and provided
              that  Recipient  shall ensure that each such  director,  employee,
              agent,   contractor   or  affiliate  is  prior  to  disclosure  of
              Confidential Information to them bound and obligated in writing by
              provisions  of  confidentiality  in relation  to the  Confidential
              Information  at least  equal to  those in this  Agreement.

9.2   If necessary to perform the Services and subject to clause 9.1, Contractor
      shall be  permitted  to disclose  Confidential  Information  of Company to
      CROs,  Monitors,  Investigators  and  Subjects who have a need to know the
      information  to perform  the  Services  or to  authorise  such  disclosure
      provided that Contractor  ensures that each such disclosure is made in the
      manner that will best fit with these confidentiality obligations.

                                       11
<PAGE>

9.3   Without limiting or affecting the obligations of  confidentiality  herein,
      where  it is a  requirement  of GCP  that  participation  in the  Study be
      documented in a Subjects'  medical  records (as this may have some bearing
      on their clinical management)  information (which may include Confidential
      Information)  bearing  direct  relevance  to  that  Subject  and  strictly
      necessary  to  comply  with  GCP  requirements  may  be  disclosed  to the
      Subject's clinician provided that such disclosures will be limited to that
      necessary for the clinical  management of the Subjects and are made in the
      manner that will best fit with these confidentiality obligations.

9.4   Upon  termination  of this  Agreement  for  whatever  reason or on request
      whether before or after termination  Recipient shall immediately surrender
      and return to Discloser all Materials in its possession or control whether
      or not they embody  Confidential  Information  without retaining any copy,
      notes, extracts or derivations therefrom.

9.5   The foregoing obligations of this clause 9 will apply to both Confidential
      Information  disclosed to or generated by Discloser or otherwise  acquired
      directly or indirectly  through the  performance of the Services and shall
      not  apply  only to  information  which  Recipient  can show by  competent
      written records maintained in the ordinary course of business was:

      9.5.1   prior to disclosure or generation hereunder publicly available, or
              otherwise  lawfully in its  possession  and was known to Recipient
              without restrictions to its use;

      9.5.2   becomes publicly available through sources  independent of and not
              by  any  act or  omission  of  Recipient, its  employees,  agents,
              sub-contractors or affiliates;

      9.5.3   subsequent to disclosure  or  generation  hereunder,  disclosed to
              Recipient  by a third party who did not receive  such  information
              directly or indirectly  from Discloser or any of its Affiliates or
              in  violation  of  Discloser's  rights and which  third  party was
              entitled to and did disclose the same without restriction.

9.6   Recipient  may  disclose  such  Confidential  Information  as is necessary
      pursuant to a legal or  regulatory  requirement  provided  that as soon as
      Recipient  is  aware  of each of the  same it  notifies  Discloser  of the
      requirement  and the  relevant  Confidential  Information  and  gives  all
      reasonable  assistance  and  co-operates  to take such  measures as may be
      available to limit the disclosure and preserve the  confidentiality of the
      Confidential Information nevertheless required to be disclosed.

9.7   Nothing  in  this  Agreement  shall  oblige   Discloser  to  disclose  any
      information  to Recipient nor shall it be construed as granting any rights
      by licence or  otherwise  in any product  Invention  or other  property of
      Discloser or any of its Affiliates.

                                       12
<PAGE>

9.8   Recipient's   obligations  of  confidentiality   shall  continue  even  if
      Confidential  Information  has been returned to Discloser and shall in any
      event survive termination of this Agreement.

10    Ownership of Materials and Inventions

10.1  Each party  shall  retain  ownership  of its  Materials  and  Confidential
      Information and the other party shall have no proprietary claim thereto.

10.2  Contractor acknowledges and agrees that as between Company and Contractor,
      Company  shall be or if the case  requires  shall be deemed to be the sole
      and  exclusive  owner of the  entire  interest,  title,  and  intellectual
      property  rights and  rights of like  nature in any  Improvement  (whether
      patentable  or not)  developed  by  Contractor  as a result of  performing
      Services  insofar and to the extent that such  Improvement is to Company's
      existing products which comprise  leishmania extract for immunotherapy for
      psoriasis and  leishmaniasis  ("the Base Product") and which do not use or
      exploit the Technology  (as defined in the Technology  Agreement) or is an
      Improvement comprising use of the Base Product in any other indication and
      which does not use or exploit the Technology.  For all other  Improvements
      and their uses in respect of the  Technology  and any  Improvement  to the
      Technology,  Contractor  shall be and remain the sole and exclusive  owner
      thereof.

10.3  Contractor  shall promptly  disclose to Company in writing any Improvement
      of which it becomes aware arising  wholly or partly out of the  activities
      undertaken  in the  course  of or in any  way  whatsoever  related  to the
      Service and/or Study.

10.4  At  Company's  request,   Contractor  shall  assign  and/or  execute  such
      documents and/or take such other action as may be reasonably  necessary to
      ensure  that the rights  referred  to in clause  10.2  above are  properly
      vested  in  Company  and in  connection  with  establishing,  maintaining,
      extending and defending such rights.

10.5  Contractor  shall provide  advisory  services to Company in respect of the
      protection,   defence  and   exploitation   of  those  patents  and  other
      intellectual  property  rights in those products  services or processes as
      might be generated  or acquired  during the conduct of the Services and to
      which the Company is entitled. Such services shall include a review of all
      patents and other  intellectual  property rights  currently  subsisting in
      Company and will be in accordance with a schedule of services to be agreed
      by the parties on or before 31st December 2001 for the year commencing 1st
      January 2002. All external  costs and expenses  incurred by the Contractor
      in providing such services shall be the  responsibility of the Company and
      shall be reimbursed to the Contractor upon  presentation of valid invoices
      therefor.

                                       13
<PAGE>

11    Fees and Budgets

11.1  In  consideration  of the performance of the Services Company shall pay to
      Contractor the fees as specified herein.

11.2  Company  acknowledges and agrees that Contractor has commenced  conduct of
      the  Services  prior to  signature  of this  Agreement  Accordingly,  upon
      signature,  Contractor  shall  present to Company  invoices  for  Services
      conducted to date of this  Agreement.  The fees payable to the  Contractor
      for the year to December 31st 2001 shall be $US3,000,000, payable in equal
      instalments of  $US1,500,000  for the period to the date of this Agreement
      and for the month of December 2001.

11.3  The fees  payable to the  Contractor  for the year to  December  31st 2002
      shall be $US8,000,000,  payable in equal instalments of $US665,000 in each
      month of 2002.

11.4  The fees payable to the  Contractor  for the year 2003 and beyond shall be
      the subject of negotiation between the parties. During the fourth calendar
      quarter of 2002 the parties shall meet to discuss the  development  of the
      project  contemplated  herein  to date and  negotiate  in good  faith  the
      continuation of this Agreement on suitable financial terms, which shall be
      based upon Contractor's usual financial terms for providing like services.

11.5  The  Contractor  and the Company shall agree on the Budget for Study Costs
      for the period to 31st December 2002. . The Budget for Study Costs for the
      year 2003 and beyond shall be agreed between the parties during the fourth
      calendar  quarter of 2002,  and the Budget  shall be  reviewed  thereafter
      annually.

11.6  Company  shall be  responsible  for  payment  of all  Study  Costs and all
      payments to CROs Investigators or Study Sites direct.  Notwithstanding the
      foregoing,  Contractor  may make payment for Study Costs  necessarily  and
      reasonably  incurred by Contractor in performance of the Services provided
      that Contractor shall not incur any cost materially in excess of aggregate
      specified in the Budget  without first  obtaining  the written  consent of
      Company.  For this purpose  Contractor shall report to the Company's Chief
      Executive  Officer or such other person as Company shall from time to time
      nominate.  Company shall reimburse  Contractor for all such costs incurred
      by Contractor.

11.7  Contractor  shall  present  invoices to Company for Fees due to be paid in
      accordance  with clauses 11.2,  11.3 and 11.4 above and monthly in arrears
      for those costs  incurred  under  clause 11.6 during the  preceding  month
      together  with such  evidence of such Study Costs and  expenses as Company
      may reasonably  require.  Each invoice shall describe in reasonable detail
      the  matters to

                                       14
<PAGE>

      which the invoice relates. Payment of proper and correct invoices shall be
      made by Company within 30 days of the date of invoice.

11.8  Should any payment  hereunder be paid after its due date,  Contractor  may
      charge  interest  on any  amount  unpaid  at  LIBOR  plus 5% from the date
      payment is first due until the date of actual payment.  In addition to the
      right to charge  interest,  in the event any amount remains unpaid 45 days
      or more from the invoice date,  the  Contractor may suspend the conduct of
      the Project or any of the Services.

11.9  All payments to be made by Company to Contractor  hereunder  shall be made
      to the following account:

      Pay to:                      FC - Silicon Valley Bank
                                   3003 Tasman Drive
                                   Santa Clara, CA 95054, USA

      Routing & Transit No:        \\FW:121140399
                                   --------------

      Swift Code:                  SVBKUS6SA

      For Credit of:               SkyePharma Inc

      Final Credit Account No:     FNC - 3300161686

12    Relationship of Parties

12.1  Contractor is engaged as and shall provide the Services as an  independent
      contractor  to Company and  nothing in this  Agreement  or any  subsequent
      document  entered  into by the parties  shall be  construed as implying or
      creating any employment, partnership or other relationship between Company
      or its  Affiliates,  and  Contractor  or anyone used by  Contractor in the
      performance of the Services including without  limitation,  CROs, Monitors
      and Investigators.

12.2  Notwithstanding  the  remainder  of this  clause  12.2,  any  part of this
      Agreement or the terms of any power of attorney or other document  entered
      into by either or both of the parties,  unless this clause is specifically
      overridden  by  reference  Contractor  shall have no  authority to bind or
      commit  Company  in any manner  whatsoever  and shall not at any time hold
      itself  out to as  having  the  authority  to  enter  into  or  incur  any
      commitment,  expense,  liability or  obligation of any nature on behalf of
      Company,  except to the limited extent to which this Agreement  authorises
      Contractor in performance of the Services to identify CROs,  Investigators
      and Study  Sites,  and to incur  Study Costs and then only  provided  that
      nothing in any  agreement  entered into between  Contractor  and any other
      person  shall bind  Company in any way to directly  make any payment or to
      provide any service on behalf of Contractor.

                                       15
<PAGE>

13    Indemnities

13.1  Company shall indemnify Contractor,  CRO, the Study Site and Investigators
      in respect of legal  liability  to third  parties  for claims for death or
      bodily  injury  caused by the  administration  of Study Drug  supplied  by
      Company for use in the Study where such liability is  attributable  to the
      negligence or wilful  misconduct of Company  (except where the same arises
      due to the  negligent  act,  omission  or  breach  of  this  Agreement  by
      Contractor provided that:

      13.1.1  Company  is  notified  in writing  within  twenty one (21) days of
              receipt by  Contractor  of notice of any claim to which  Company's
              indemnity  may apply and  Company  or its  insurers  if Company so
              requests is permitted full care and control (including settlement)
              of such claims; and

      13.1.2  Contractor  does not  take any  material  step in  relation  to or
              settle such claims and  co-operates  fully by providing to Company
              all   reasonable   assistance   (at  Company's   expense)  in  the
              investigation  and defence of such claims,  and  mitigation of any
              loss.

13.2  Company  acknowledges  and  agrees  that it will  abide by any  applicable
      Guidelines.

14    Duration and Termination

14.1  This Agreement shall commence on the date written above and shall continue
      (unless  terminated earlier in accordance with any other provision hereof,
      or  extended  by  agreement  of the  parties)  until 31st  December  2002.
      Termination or expiration of this Agreement  shall not absolve the parties
      from  liability to complete  obligations  that should have been  completed
      prior to the date of termination or from the subsequent loss and effect of
      that failure on the other party.

14.2  Company may  terminate  this  Agreement  at any time upon 30 days  written
      notice to  Contractor  and  immediately  if  Contractor is guilty of gross
      misconduct.

14.3  Either party may terminate the Study at any time by written  notice to the
      other for  reasons of Subject  safety or efficacy of the Study Drug and in
      such  circumstances   termination  of  the  Study  shall  be  carried  out
      immediately upon  notification (by telephone or otherwise) and termination
      of the  Agreement  shall be within one week of such  notification  however
      such  emergency  notification  always  shall  be  followed  by  a  written
      confirmation of termination or if that other party:

      14.3.1  is in  breach of any of the terms of this  Agreement  and,  in the
              case of breach  capable of remedy,  does not  remedy  such  breach
              within 10 days of  receipt of a notice  specifying  the breach and
              requiring its remedy; or

                                       16
<PAGE>

      14.3.2  becomes  insolvent or makes an arrangement with its creditors,  or
              otherwise ceases or threatens to cease business.

14.4  Should the Agreement be  terminated,  Company shall continue to be obliged
      to pay, and shall pay to the  Contractor  the fees specified in clause 11,
      and  Contractor  shall  provide the Services in respect of an  alternative
      product candidate as might be nominated by Company.

15    Force Majeure

15.1  The parties shall not be liable for  non-performance  of obligations under
      this Agreement (except  obligations of confidentiality) to the extent that
      such  performance  is  hindered  or  prevented  by reason of  legislation,
      government prohibition,  natural physical disaster, invasion, war, acts of
      terrorism,  civil  commotion,  'Act of God',  the refusal,  withholding or
      withdrawal of any necessary  approval by the  Regulatory  Authority or any
      other  contingency  beyond the  control of such  party  ('Force  Majeure')
      provided  that the party  affected  gives  written  notice of the event of
      Force Majeure to the other.

15.2  Should  an event of Force  Majeure  continue  for a period  exceeding  two
      months,  this  Agreement  may be  terminated by the party not claiming the
      benefit of Force Majeure giving written notice of termination to the other
      party.

16    Consequences of Termination

16.1  Upon  termination or where  specified  below upon notice of termination of
      this Agreement or the Study for any reason:

      16.1.1  at  Company's   option,   Contractor   shall  either   manage  the
              termination  of the  Study  or  transfer  responsibility  for  any
              remaining work as expeditiously as possible and in accordance with
              Company's instructions and all applicable national and local laws,
              regulations and guidelines;

      16.1.2  Contractor  shall  within  thirty  days of notice  of  termination
              return to Company all  Materials  in  Contractor's  possession  or
              control including but not limited to all Confidential Information;

      16.1.3  the accrued  rights and  obligations of the parties in relation to
              this  Agreement  or any  breach  of this  Agreement  shall  not be
              affected;

      16.1.4  Company  shall  reimburse  to  Contractor  all Study  Costs to the
              extent reasonably  incurred and that cannot be cancelled,  reduced
              or applied  elsewhere.  Contractor

                                       17
<PAGE>

              shall  perform no further  work  within  the given  notice  period
              except as may be reasonably  necessary in  accordance  with clause
              16.1.1  and  16.1.2  to close  down the Study  and/or to  transfer
              responsibility safely;

      16.1.5  the provisions of clauses 9, 10, 11, 13, 14 and this clause 16 and
              any other right or  obligation  which by its nature is intended to
              come into effect,  continue or that is necessary to give effect to
              such surviving provisions shall not be affected.

17    Assignment

17.1  The rights and obligations of Contractor under this Agreement are personal
      to Contractor and shall not be assigned sub-contracted or delegated except
      as contemplated therein,  without the prior written consent of the Company
      (which consent shall not be unreasonably withheld).

18    Entire Agreement Modification and Waiver

18.1  This Agreement  (including the Schedules and  attachments  hereto) set out
      and constitute the entire  understanding,  warranties and agreement of the
      parties.  The parties  acknowledge that no reliance is placed on any prior
      agreement,   representation  or  understanding  whether  written  or  oral
      relating to its subject matter.

18.2  No amendment  or waiver of this  Agreement or of any right herein shall be
      deemed effective unless made in writing and agreed to in writing by a duly
      authorised officer of each of the parties.

19    Notices

19.1  Any  notice  or  communication  given  under or in  connection  with  this
      Agreement  by either  party to the other  shall be in writing and shall be
      served by sending  the same by  registered  post or  recorded  delivery or
      personally  delivered to the address  specified below for such party or to
      such other address as the relevant party may have  previously  notified to
      the party giving notice in accordance  with this clause as its address for
      service:

                                       18
<PAGE>

19.2  All notices shall be addressed as follows:

      To Company:     Astralis Limited
                      135 Columbia Turnpike
                      Suite 301 Florham Park
                      New Jersey 07932, USA
                      Tel:
                      Fax:
                      Attention: Mike Ajnsztajn CEO

      With a copy to: Andrew Jay Stamelman
                      Riker Danzig Scherer Hyland & Perretti, LLP
                      1 Speedwell Avenue
                      Morristown, NJ 07962
                      (973) 538-0800 ext. 882
                      (973) 538-1984 (fax)

      To Contractor:  SkyePharma Plc, 105 Piccadilly, London W1J 7NJ
                      Tel:        +44 20 7491 1777
                      Fax:        +44 20 7491 3338
                      Attention:  Michael Ashton, CEO and Donald Nicholson, CFO.

19.3  Notices which are given in accordance  with this  Agreement will be deemed
      to have been received by the addressee:

      19.3.1  in the case of personal delivery, at the time of such delivery;

      19.3.2  in the case of  communication  by first class pre-paid post, three
              working days after despatch;

      19.3.3  in  the  case  of   communication   by  facsimile,   at  the  time
              transmission  is confirmed  to the sender  provided a hard copy of
              such notice is subsequently sent.

20    Governing Law and Jurisdiction

20.1  This  Agreement is governed by and shall be construed in all respects with
      the laws of New York.

                                       19
<PAGE>

21    Severance of Illegal Terms

21.1  If any provision of this Agreement is agreed by the parties to be illegal,
      void or  unenforceable  or if any  regulatory  body or court of  competent
      jurisdiction  in a final  decision so  determines,  this  Agreement  shall
      continue in force save that such provision shall be deemed to be severable
      and  excised  herefrom  with  effect  from the date of such  agreement  or
      decision or such  earlier date as the parties may agree  provided  that if
      such materially affects the commercial terms of this Agreement the parties
      shall  negotiate  in good faith to agree  amendment  of the  Agreement  to
      maintain  and  preserve  as  far  as  possible  the  originally   intended
      commercial effect.

22    Counterparts

22.1  This Agreement  shall have two identical  original  documents,  namely the
      duly signed and dated top copy  version one of which is to be held by each
      of the parties.  Each  counterpart may be deemed as an original but all of
      which shall constitute one and the same instrument.

23    Publicity

23.1  The  parties  agree  that  neither  of them will make any  official  press
      release,  announcement or other formal  publicity  relating to the subject
      matter of this  Agreement  without first  obtaining in each case the prior
      written consent of the other party, which consent will not be unreasonably
      withheld.

                                       20
<PAGE>

IN WITNESS  whereof  the duly  authorised  representative  of the  parties  have
executed this Agreement the day and year first above written.

Signed by:

/s/ SKYEPHARMA INC
....................................................................
duly authorised for and on behalf of
SKYEPHARMA INC

Title:  ...........................................................

Date:   ...........................................................

Signed by:

/s/ ASTRALIS LIMITED
....................................................................
duly authorised for and on behalf of
ASTRALIS LIMITED

Title:  ...........................................................

Date:   ...........................................................

                                       21
<PAGE>

SCHEDULE 1

                                    Services

Organising and co-ordinating meetings
Finalizing Budgets for Study Costs
GANTT chart production for development of Product

                                       22
<PAGE>

SCHEDULE 1 Part II

To be finalised

                                       23
<PAGE>

SCHEDULE 2

Laboratory

                                       24
<PAGE>

SCHEDULE 3 Timetable

DELETE THOSE PARTS NOT APPLICABLE

                                                  Estimated      Completion
Event                                             Period         Date

Agreement of Proposal:
Study preparation and planning
Final approved protocol
Regulatory submission
Selection of Sites/Pre-study  visits
Local Research Ethics Committee Submissions
First Ethics Committee Approval
Distribute supplies to Study Site
Study Site initiation visits
Commence screening
First Patient enrolled
Commence Clinical Phase - first visit
Interim safety data provided (if applicable)
Enrollment of Last Subject
Last Patient last visit/Last Patient complete
End of Clinical Phase
Close Out
Submission of last CRF to data management
Results of laboratory assays analysis
Database locked
Statistical Analysis: All Statistical tables and listings available to Company
Draft integrated Study report provided to Company
Provision of CRFs and comments on Study Report
Final integrated Study report
Latest date for Completion of Services

                                       25
<PAGE>

SCHEDULE 4

ATTACHMENT 1 - Study Protocols

NWK3: 659810.01

                                       26

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