Document:

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                                                                   EXHIBIT 10.35

DATED                                                                       2002

                   (1) BOOTS HEALTHCARE INTERNATIONAL LIMITED

                                       AND

                       (2) BIOPROGRESS TECHNOLOGY LIMITED

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                     PRODUCT DEVELOPMENT AGREEMENT (STAGE 1)

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                                LEGAL DEPARTMENT
                              THE BOOTS COMPANY PLC
                                   NOTTINGHAM
                                     NG2 3AA

                              TEL : (0115) 959 3432
                              FAX : (0115) 959 3314

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                                      INDEX

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<S>   <C>                                                                     <C>
1.    Definitions and Interpretation.......................................... 1

2.    The Initial Development Programme....................................... 4

3.    Intellectual Property Rights............................................ 7

4.    After Completion of the Initial Development Programme...................11

5.    Exclusivity.............................................................16

6.    Confidentiality.........................................................17

7.    Force Majeure...........................................................18

8.    Termination.............................................................19

9.    Assignment..............................................................20

10.   Change of Control.......................................................20

11.   Relationship............................................................21

12.   Waiver..................................................................21

13.   Notices.................................................................21

14.   Entire Agreement and Amendments.........................................23

15.   Applicable Law and Service of Process...................................23

16.   Invalidity and Severability.............................................24

17.   Announcements...........................................................24
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SCHEDULES

1.       Initial Development Programme

2.       Matters to be provided for or taken into account in any commercial
         terms agreed pursuant to Clause 4.4

3.       The Patents

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THIS AGREEMENT is made          day of                                      2002

BETWEEN:-

(1)      BOOTS HEALTHCARE INTERNATIONAL LIMITED (registered in England number
         2741587) whose registered office is at 1 Thane Road West Nottingham NG2
         3AA (hereinafter referred to as "Boots") of the one part; and

(2)      BIOPROGRESS TECHNOLOGY LIMITED whose registered office is at Unit 1,
         Norwood Road, March, Cambridgeshire PE15 8QD (hereinafter referred to
         as "BioProgress") of the other part.

WHEREAS:-

A.       BioProgress has developed certain proprietary technology relating to
         the dose delivery and manufacture of pharmaceutical products in the
         form

B.       Boots and BioProgress have agreed to collaborate in a Product
         Development Programme, the purpose of which is to determine the
         feasibility of the formulation and manufacture of medicinal products in
         this new dosage form and containing XXXXXX as an active ingredient and,
         subject to the successful determination of such feasibility, to enter
         into further negotiations relating to the commercial development of
         such products in this form as Boots may require, on the terms and
         conditions set out below.

NOW IT IS HEREBY AGREED as follows:-

1.       DEFINITIONS AND INTERPRETATION

1.1      In this Agreement, unless the context otherwise requires, the following
         expressions have the following meanings: -

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"Affiliate"         means, in relation to any company, any legal entity
                    controlling, controlled by or under common control with the
                    company in question. For this purpose, "control" means
                    direct or indirect possession of the power to direct or
                    cause the direction of the management or policies of such
                    company or entity, whether pursuant to the ownership of
                    voting securities, by contract or otherwise;
"Commercial
Development
Programme"          means a programme for the development on a commercial basis
                    and scale of the Products, the provisions relating to the
                    negotiation, agreement and execution of the Commercial
                    Development Programme being more particularly set forth in
                    Clause 4;

"Effective Date"    means 2nd April 2002;

"Initial
Development
Programme"          means a development programme, the purpose of which is to
                    determine the feasibility of formulating Products using
                    XXXXXX Technology, as the same is more particularly set
                    forth in Schedule 1, subject to such variations as may be
                    agreed between the parties from time to time in accordance
                    with Clause 2.6, and all references to the Initial
                    Development

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                    Programme in this Agreement shall, for the avoidance of
                    doubt, include the submission by BioProgress to Boots of
                    such written or other reports and documentation, and the
                    delivery to Boots of such product samples, as may be
                    required pursuant to the provisions of the Initial
                    Development Programme;

"Inventions"        means all or any (as the context so permits) inventions,
                    improvements, discoveries, methods or other valuable
                    developments, whether patentable or otherwise;

"Working Day"       means any day other than a Saturday, Sunday or Bank, Public
                    or Statutory Holidays in England and Wales.

1.2      In this Agreement, words denoting the singular shall include the plural
         and vice versa, and a reference to any gender includes a reference to
         all other genders.

1.3      References in this Agreement to Clauses and Schedules shall be
         references to Clauses of, and Schedules to, this Agreement.

1.4      The Schedules shall form an integral part of this Agreement.

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1.5      The headings to this Agreement are for convenience only and shall not
         affect its interpretation.

2.       THE INITIAL DEVELOPMENT PROGRAMME

2.1      Boots and BioProgress shall perform their respective obligations under
         the Initial Development Programme in accordance with the terms thereof,
         subject to the provisions of Clause 2.8.

2.2      Boots shall be entitled, by giving notice to that effect to
         BioProgress, to terminate the Initial Development Programme with
         immediate effect at any time if Boots should reasonably believe that
         there is no reasonable prospect of the Initial Development Programme
         being completed within the anticipated timescale specified therein or
         if Boots does not wish to proceed with the Initial Development
         Programme. If Boots terminates the Initial Development Programme
         pursuant to this Clause 2.2 on any date up to and including 2nd July
         2002, the payment made by Boots pursuant to Clause 2.3.1 shall not be
         refundable but Boots shall be under no obligation to make any further
         payment to BioProgress including, but without limitation, the payment
         referred to in Clause 2.3.2. If Boots terminates the Initial
         Development Programme on any date on or after 3rd July 2002, neither of
         the payments made by Boots to BioProgress pursuant to Clause 2.3 shall
         be refundable but Boots shall be under no obligation to make any
         further payment to BioProgress.

         Boots

2.5      Boots shall remit all monies due to BioProgress under this Agreement by
         electronic bank transfer, or such other method as the parties may agree
         in writing.

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2.6      The following procedures shall apply to the making of variations to the
         Initial Development Programme:-

         2.6.1    If Boots requires any amendment to be made to the Initial
                  Development Programme, it shall give notice to BioProgress
                  specifying the nature of the variations required;

         2.6.2    BioProgress shall then, within five (5) Working Days of the
                  receipt of the notice referred to in Clause 2.6.1, give notice
                  to Boots confirming whether it is able to undertake the
                  variation requested and, if so, details of the additional cost
                  (if any) which it reasonably estimates that it will incur, and
                  the additional time (if any) which it estimates will be
                  necessary, in order to complete the Initial Development
                  Programme.

         2.6.3    Boots shall give notice to BioProgress, within ten (10)
                  Working Days of receipt of the notice referred to in Clause
                  2.6.2, stating whether it still requires the said variation to
                  be undertaken in the light of the information provided by
                  BioProgress in that notice.

         2.6.4    If Boots gives notice pursuant to Clause 2.6.3 to the effect
                  that it requires the said variation to be undertaken, then:-

                  2.6.4.1  BioProgress shall complete its execution of the
                           Initial Development Programme in accordance with the
                           said variation;

                  2.6.4.2  The charges payable by Boots to BioProgress under
                           Clause 2.3 shall be increased by such amount (if any)
                           as is notified to Boots by BioProgress pursuant to
                           Clause 2.6.2; and

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                  2.6.4.3  The time for completion of the Initial Development
                           Programme shall be increased by such period (if any)
                           as is notified to Boots by BioProgress pursuant to
                           Clause 2.6.2.

         2.6.5    If Boots gives notice pursuant to Clause 2.6.3 that it does
                  not accept the terms for the variation as notified to it by
                  BioProgress pursuant to Clause 2.6.2, then, in the absence of
                  any subsequent agreement between the parties as to the terms
                  on which such variation shall be effected, Boots may, but
                  shall not be obliged to, terminate the Initial Development
                  Programme by giving notice to that effect. In the event of
                  such termination the provisions of the final sentence of
                  Clause 2.2 shall apply.

         2.6.6    If Boots gives no notice pursuant to Clause 2.6.3, or if Boots
                  fails to give notice of termination pursuant to Clause 2.6.5
                  within twenty (20) Working Days of the date of the giving by
                  it of notice to BioProgress pursuant to Clause 2.6.3,
                  BioProgress shall continue the execution of the Initial
                  Development Programme without amendments.

2.7      Without prejudice to any provisions of the Initial Development
         Programme copyright in all reports and other documentation created by
         BioProgress pursuant to the Initial Development Programme or to the
         Agreement generally, shall vest, immediately upon their creation, in
         Boots and BioProgress shall at the request and expense of Boots
         promptly do all such things and execute all such documents as Boots
         shall reasonably require in order validly to vest such copyright in
         Boots.

2.8      If the Initial Development Programme, or any milestone thereof, shall
         not have been completed by the relevant date specified therein, the
         parties shall,

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         without prejudice to the rights of Boots under Clause 2.2, negotiate in
         good faith, and use reasonable endeavours to agree, a revised date,
         which shall with effect from agreement of the same become the date by
         which the Initial Development Programme, or the relevant milestone (as
         the case may be) shall then be completed.

3.       INTELLECTUAL PROPERTY RIGHTS

3.1      BioProgress hereby warrants to Boots as follows:-

         3.1.1    that all intellectual property (whether patented or
                  otherwise), know-how, technical information and all other
                  rights, knowledge and information of a similar nature
                  including, without limitation, the XXXXXX(TM) Technology used
                  or to be used by BioProgress or Boots (whether or not
                  disclosed to Boots) in the Initial Development Programme, and,
                  if applicable, the Commercial Development Programme, and also
                  or used in the manufacture of any Product at any time
                  hereafter (whether during the Commercial Development Programme
                  or pursuant to any commercial exploitation of the Product) and
                  relating to the development and manufacture of, and the
                  processes used to XXXl, the capsules used in the xxxxxx or
                  XXXXXX(TM) process are, or shall be, as between BioProgress
                  and Boots vested in BioProgress or its Affiliates absolutely
                  and without encumbrance; and

         3.1.2    that BioProgress has the full and unfettered right and power
                  to enter into this Agreement including, without limitation,
                  the right and power to enter into all its obligations
                  hereunder.

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3.2      The warranties given by BioProgress in Clause 3.1 will apply in full to
         any Invention which hereafter vests in BioProgress pursuant to Clauses
         3.4 or 3.6.

3.3      It is agreed and declared that all intellectual property (whether
         patented or otherwise), know-how, technical information and all other
         rights, knowledge and information of a similar nature relating to the
         Product (including, without limitation, all materials and formulations
         used in or necessary for the manufacture thereof, and all processes
         necessary to make, or otherwise relating to such materials and
         formulations) used or to be used by BioProgress or Boots (whether or
         not disclosed to Boots) in the Initial Development Programme, and, if
         applicable, the Commercial Development Programme, and also or used in
         the manufacture of any Product at any time hereafter (whether during
         the Commercial Development Programme or pursuant to any commercial
         exploitation of the Product) but specifically excluding the XXXXXX(TM)
         technology are or shall be, as between BioProgress and Boots, vested in
         Boots absolutely and without encumbrance. Boots hereby grants to
         BioProgress a royalty free, non-exclusive licence, coterminous with the
         Initial Development Programme or, if applicable, the Commercial
         Development Programme, to use all such intellectual property),
         know-how, technical information and other rights, knowledge and
         information for the purpose of performing its duties in relation to the
         Initial Development Programme and the Commercial Development Programme,
         but not further or otherwise.

3.4      All Inventions relating to the Product (including, without limitation,
         all materials and formulations used in or necessary for the manufacture
         thereof, and all processes necessary to make, or otherwise relating to
         such materials

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         and formulations) made during or as a consequence of the execution of
         the Initial Development Programme shall be the property of Boots.

3.5      If BioProgress, whether solely or jointly with Boots, makes during the
         Initial Development Programme any Invention to which Clause 3.3
         relates, BioProgress agrees to assign to Boots the entire right, title
         and interest anywhere in the world to Boots, without any additional
         payment other than the charges payable by Boots to BioProgress for the
         execution of the Initial Development Programme (or such part thereof as
         shall have become due and payable as at the effective date of
         termination of the Initial Development Programme, if applicable).
         BioProgress shall, at the request and expense of Boots, do all such
         things and execute all such documents as Boots shall reasonably require
         in order validly to vest such right, title and interest in Boots, and
         shall co-operate fully in the prosecution of any such right, title or
         interest.

3.6      All Inventions relating to materials and formulations used in the
         development and manufacture of, and the processes used to form and
         seal, the capsules used in the encapsulation or XXXXXX(TM) process
         relating to the Product, shall be the property of BioProgress.

3.7      Subject to the provisions of Clause 3.8, if Boots, whether solely or
         jointly with BioProgress, makes any Invention to which Clause 3.6
         relates either during or as a consequence of the execution of the
         Initial Development Programme, Boots agrees to assign to BioProgress
         the entire right, title and interest anywhere in the world to
         BioProgress. Boots shall, at the request and expense of BioProgress, do
         all such things and execute all such documents as Boots shall
         reasonably require in order validly to vest such right, title and

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         interest in BioProgress, and shall co-operate fully in the prosecution
         of any such right, title or interest.

3.8      In the event that BioProgress should decide not to file any patent
         applications relating to any Invention to which Clause 3.6 relates, or
         fails to do so within six (6) months of the completion or effective
         termination of the Initial Development Programme (or, if later, from
         the date on which such Invention is made, of which BioProgress shall
         immediately give notice to Boots), Boots may, at its discretion, file
         patent applications relating to such Inventions in any country or
         countries in the world in which patent applications relating to the
         said Inventions have not been filed by BioProgress. BioProgress if
         required by Boots (whether for the purpose of filing patent
         applications in respect of the same or otherwise) shall promptly assign
         to Boots the entire right, title and interest throughout the world in
         such Inventions without any payment other than the charges payable to
         BioProgress by Boots for the execution of the Initial Development
         Programme (or such part thereof as shall have become due and payable as
         at the effective date of termination of the Initial Development
         Programme, if applicable). Upon the assignment to Boots of such right,
         title and interest, Boots shall grant to BioProgress an irrevocable,
         royalty free, non-exclusive licence, with the power to grant
         sub-licenses, to use such Inventions, and any patent or patent
         applications applicable thereto for any purpose not directly or
         indirectly competitive with the development, manufacture, sale,
         distribution or marketing of the Products (and for the avoidance of
         doubt, it is hereby declared that any such purpose shall not be
         regarded as not being so competitive purely on the basis that it is
         intended to be carried on in any country in the world in which the
         Products are not currently being developed, manufactured, sold,
         distributed or marketed, whether by Boots or any third party).
         BioProgress shall, at the

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         request and expense of Boots, do all such things and execute all such
         documents as Boots shall reasonably require in order validly to vest
         such right, title and interest in Boots, and shall co-operate fully in
         the prosecution of any such right, title or interest.

3.9      For the avoidance of doubt, all references to the right, title and
         interest in an Invention shall include, without limitation, the right
         to grant licences of the same anywhere in the world.

4.       AFTER COMPLETION OF THE INITIAL DEVELOPMENT PROGRAMME

4.1      Boots shall have the right, subject to the payment of the sums
         specified hereinafter, within six (6) months of the completion of the
         Initial Development Programme, to give notice to BioProgress confirming
         whether or not it wishes to enter into the Commercial Development
         Programme. If Boots exercises the said right prior to the expiry of one
         calendar month from the date of the completion of the Initial
         Development Programme, such right shall be exercisable without charge.
         However, Boots shall only be entitled to exercise the said right after
         the expiry of the said period of one calendar month upon payment XXXXXX
         in respect of each subsequent calendar month, payable in advance at the
         beginning of that month. If Boots fails to give such notice within the
         said period, or fails to make any payment under this Clause 4.1 upon
         the date of commencement of the period to which it relates or, if
         later, within 30 (thirty) days of the receipt by it of BioProgress'
         invoice therefor, it shall be deemed to have given notice to
         BioProgress that it does not wish to proceed with the Commercial
         Development Programme.

4.2      If Boots gives notice (or, pursuant to Clause 4.1, is deemed to have
         given notice) that it does not wish to proceed with the Commercial
         Development Programme, the following provisions shall apply:-

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         4.2.1    All Inventions which may have been vested in or assigned to
                  Boots pursuant to Clause 3, together with all patents and
                  patent applications relating thereto, shall immediately
                  re-vest in BioProgress, who shall, for the avoidance of doubt,
                  have, as between itself and Boots the full and unencumbered
                  right to exploit such Inventions, patents and patent
                  applications for any purpose throughout the world; and

         4.2.2    Boots shall, at the request and expense of BioProgress,
                  promptly do all such things and execute all such documents as
                  BioProgress reasonably requires in order validly to vest such
                  Inventions, patents and patent applications in BioProgress.

4.3      If Boots gives notice to BioProgress pursuant to Clause 4.1 that it
         does wish to proceed with the Commercial Development Programme, Boots
         and BioProgress shall negotiate in good faith, and use reasonable
         endeavours to agree, all terms and conditions relating to the
         Commercial Development Agreement including, without limitation, the
         precise nature, content and purpose of the Commercial Development
         Programme, the field of products to which it will relate, the ownership
         of all Inventions and other intellectual property and know-how
         conceived or discovered during the Commercial Development Programme,
         and the timescales for its completion. If, notwithstanding the
         compliance by both parties of their obligations as set out in the
         foregoing provisions of this Clause 4.3, the parties have not entered
         into a binding written agreement in respect of all matters relating to
         the Commercial Development Programme within three (3) months of the
         date of giving of notice by Boots pursuant to clause 4.1, then either
         party may terminate such negotiations with immediate effect upon giving
         notice to that effect to the other party.

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4.4      If BioProgress and Boots shall enter into the said binding written
         agreement referred to in Clause 4.3, the parties shall then, subject to
         Clause 4.5, negotiate in good faith, and use reasonable endeavours to
         agree, the terms upon which any Products developed pursuant to the
         Commercial Development Programme will be supplied to or manufactured by
         Boots. If no such binding agreement is entered into within nine (9)
         months of the date of the giving of notice by Boots to BioProgress
         pursuant to Clause 4.1, the following conditions shall apply:-

         4.4.1    Boots may, by giving notice to that effect to BioProgress,
                  terminate the negotiations relating to the said commercial
                  terms (either with regard to all such commercial terms or with
                  regard to any specified products) by giving notice to that
                  effect to BioProgress. If Boots shall give such notice, All
                  Inventions which may have vested in or been assigned to Boots
                  pursuant to Clause 3, together with all patents and patent
                  applications relating thereto, shall immediately re-vest in
                  BioProgress, who shall, for the avoidance of doubt, have, as
                  between itself and Boots the full and unencumbered right to
                  exploit such Inventions, patents and patent applications for
                  any purpose throughout the world;

         4.4.2    Unless and until Boots serves any notice to BioProgress
                  pursuant to Clause 4.4.1, the provisions of the first
                  paragraph of this Clause 4.4 shall continue to apply, however
                  the provisions of Clause 5 shall apply only in relation to any
                  Products in respect of which negotiations are actively
                  continuing;

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         4.4.3    In respect of any Products to which the provisions of Clause 5
                  shall cease to apply pursuant to Clause 4.4.2, BioProgress
                  shall not without the prior written consent of Boots (such
                  consent not to be unreasonably withheld) enter into any
                  discussions, negotiations or agreements with any third party
                  concerning any Product, the effect of which would be to
                  preclude Boots from continuing or resuming negotiations with
                  BioProgress in respect of such Products;

4.5      Notwithstanding the provisions of Clause 4.4, it is agreed that any
         commercial terms agreed by the parties pursuant to Clause 4.4 shall
         include provisions giving effect specifically to the matters, or
         embodying the principles (as the case may be), set out in Schedule 2.

5        EXCLUSIVITY

5.1      BioProgress shall not, and shall procure that its Affiliates do not, at
         any time participate or become involved in any capacity in, whether
         alone or in collaboration or association with any third party, or
         provide any form of support (whether financial, technical or
         otherwise), advice or services in connection with, the development,
         manufacture, supply, distribution or marketing of any Product which is
         or is capable of being the subject of this Agreement nor enter into or
         participate in any discussions, negotiations or agreements, whether
         binding or otherwise, with any third party in relation to any such
         participation, involvement or provision, whether current or proposed,
         except in the following circumstances:-

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         5.1.1    Boots has terminated the Initial Development Programme, other
                  than as a result of any failure by BioProgress to perform any
                  of its obligations under this Agreement in a timely manner;

         5.1.2    Boots has served or is deemed to have served any notice on
                  BioProgress pursuant to Clause 4.1 to the effect that it does
                  not wish to proceed with the commercial Development Programme,
                  provided that where negotiations are continuing with regard to
                  any Product, the above exception shall only apply in respect
                  of any Product which formed part of the subject matter of the
                  Initial Development Programme but which Boots does not wish to
                  form part of the Commercial Development Programme; or

         5.1.3    Boots terminates any negotiations relating to the Commercial
                  Development Programme pursuant to Clause 4.4.1, provided that
                  where negotiations are continuing with regard to any Product,
                  the above exception shall only apply in respect of any Product
                  in respect of which such negotiations are terminated.

5.2      For the avoidance of doubt, nothing in Clause 5.1 shall prevent
         BioProgress or its Affiliates at any time from supplying to third
         parties machinery, ingredients, excipients or other materials intended
         to be used or capable of being used for the development or manufacture
         of any product which is or is capable of being the subject of this
         Agreement, or from licensing to third parties the use of any
         intellectual property (whether patented or otherwise), know-how,
         technical information or any other rights, knowledge and information of
         a similar nature including, without limitation, the XXXXXX(TM)
         Technology for the

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         purposes of the development or manufacture of any product which is
         or is capable of being the subject of this Agreement.

5.3      Nothing in this Agreement shall prevent Boots at any time from entering
         into any discussions, negotiations or agreements, whether binding or
         otherwise the subject matter of which is, whether in whole or in part,
         the development, manufacture, sale, distribution or promotion of any
         Product which is capable of being developed, manufactured, sold,
         distributed or marketed in competition with any Products which are the
         subject of the Agreement.

5.4      If either:-

         5.4.1    BioProgress receives directly or indirectly from any third
                  party any expression of interest by that third party in
                  entering into discussions, negotiations or commercial
                  arrangements with BioProgress in relation to the development,
                  manufacture or supply of any product capable of falling within
                  the definition of "Product" in Clause 1 and developed or
                  manufactured using N-Robe(TM) Technology; or

         5.4.2    BioProgress wishes to enter into discussions, negotiations or
                  commercial arrangements with any third party in relation to
                  the development, manufacture or supply of any product to which
                  Clause 5.4.1 applies.

         BioProgress shall promptly give notice to that effect to Boots and
         allow to Boots a period of 90 (ninety) days from the date of receipt of
         such notice to determine whether it wishes to enter into any such
         discussions, negotiations or arrangements with BioProgress. If Boots

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         indicates that it is so interested, Boots and BioProgress shall
         negotiate with each other in good faith and use reasonable endeavours
         to agree the terms of such development, manufacture or supply.
         BioProgress shall not enter into any discussions, negotiations or
         commercial arrangements with any third party in relation to the
         development, manufacture or supply of such product unless and until
         Boots has informed BioProgress that it does not wish to enter into the
         same with BioProgress, or the said period of 90 (ninety) days has
         elapsed, or the parties are unable to reach agreement upon the terms of
         such development, manufacture or supply, notwithstanding the
         performance by the parties of their obligation under this Clause 5.4,
         whichever shall be the earlier.

6        CONFIDENTIALITY

6.1      Subject to the following provisions of this Clause, neither party shall
         (whether during the term of this Agreement or thereafter) without the
         prior written consent of the other disclose to any person, firm or
         company any information supplied by the other under or in contemplation
         of this Agreement, or use any such information except as contemplated
         or provided hereunder.

6.2      Each party shall inform any of its employees to whom any of the said
         information is disclosed of the provisions of this Clause and shall use
         reasonable endeavours to ensure that each such employee shall observe
         such provisions.

6.3      The obligations of each party under this Clause shall not apply, or
         shall cease to apply, to any information which:-

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         6.3.1    is public knowledge at the time of this Agreement, or
                  subsequently becomes public knowledge through no act or
                  failure to act on the part of the recipient or its employees;
                  or

         6.3.2    is known to the recipient and at its free disposal at the time
                  of disclosure, or which is subsequently disclosed to the
                  recipient by a third party lawfully entitled to disclose the
                  same; or

         6.3.3    is required to be disclosed by law.

7        FORCE MAJEURE

7.1      Neither party shall be under any liability whatsoever to the other for
         failure or delay in the performance of its obligations under the
         Agreement where such performance becomes impracticable by reason of
         Force Majeure.

7.2      The party whose performance is not so affected by reason of Force
         Majeure shall be entitled to terminate this Agreement with immediate
         effect by giving notice to the other party if the performance by the
         other party of its obligations under this Agreement becomes or remains
         impracticable by reason of Force Majeure for an aggregate period in
         excess of ninety (90) days.

7.3      In this Clause, the expression "Force Majeure" means war, labour
         disputes, accidents, shortages of materials, acts of government (or
         other competent authorities) or any other matters (whether or not of
         the same nature of the foregoing), which are beyond the reasonable
         control of the party affected.

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8        TERMINATION

8.1      Either party may terminate this Agreement with immediate effect by
         giving notice to the other party in any of the following events:-

         8.1.1    if the other party should be in breach of any of the
                  provisions of this Agreement and such breach (if capable of
                  remedy) shall continue thirty (30) days after notice in
                  writing specifying the breach and requiring the same to be
                  remedied has been given; or

         8.1.2    if a resolution is passed or adopted for the winding-up of the
                  other party (otherwise than for the purposes of and followed
                  by an amalgamation or reconstruction previously approved in
                  writing), or if a petition is presented for the appointment of
                  an administrator or liquidator (and is not discharged within
                  14 days), or if a receiver or administrative receiver is
                  appointed, or an encumbrancer takes possession of the whole or
                  any part of its undertaking or assets, or if the other party
                  becomes insolvent , or if any analogous event shall occur in
                  any territory to whose jurisdiction the other party is
                  subject; or

         8.1.3    if the other party makes or seeks to make any composition or
                  arrangement with its creditors, or proposes any voluntary
                  arrangement, or is unable to pay its debts as they fall due,
                  or if any distress or execution is levied on any of its assets
                  (and is not discharged within fourteen (14) days), or if any
                  judgment for a monetary sum be given against it and is not
                  paid within fourteen (14) days, or if any analogous event
                  shall occur in any territory to whose jurisdiction the other
                  party is subject; or

                                       19
<PAGE>

         8.1.4    if the other party ceases or, in the reasonable opinion of the
                  party giving notice of termination, is likely to cease, to
                  carry on the whole or any relevant part of its business or
                  trade.

8.2      Termination for whatever cause of this Agreement shall be without
         prejudice to the rights of either party arising hereunder or as a
         result of any default or breach of obligation hereunder, which shall
         have accrued prior to the date of such termination.

8.3      Notwithstanding termination of this Agreement, the provisions of Clause
         6 shall continue in full force and effect.

9        ASSIGNMENT

9.1      Boots may assign any of its rights or obligations hereunder to any of
         its Affiliates.

9.2      This Agreement is personal to BioProgress who shall not, without Boots'
         prior written consent, assign any of its rights or obligations
         hereunder and any purported or attempted assignment by BioProgress or
         transfer by operation of law without such consent shall give Boots the
         right to terminate this Agreement with immediate effect by giving
         notice in writing to BioProgress.

9.3      This Agreement shall be binding on the permitted assignees and
         successors of the parties hereto.

10       CHANGE OF CONTROL

10.1     BioProgress shall inform Boots immediately in the event of there being
         any change in the control of BioProgress, for which purpose "control"

                                       20
<PAGE>

         shall have the same meaning as that contained in the definition of
         "Affiliate" in Clause 1.1.

10.2     If there is any such change in control (whether or not Boots has
         received notice thereof), Boots may terminate this Agreement with
         immediate effect by giving notice in writing to BioProgress.

11       RELATIONSHIP

         Each party shall be responsible for its own obligations arising under
         or consequent upon this Agreement and it is agreed that neither this
         Agreement nor the activities of the parties shall result in the
         creation of a partnership or other relationship whereby either party
         shall be held in any way responsible for the acts or omissions of the
         other.

12       WAIVER

12.1     No relaxation, forbearance, delay or indulgence by either party in
         exercising its rights under this Agreement, or any granting of time by
         such party, shall prejudice or affect its rights hereunder.

12.2     No waiver of any default or breach under this Agreement, or failure to
         enforce any rights by either party, shall constitute a waiver of any
         subsequent or continuing default or breach.

12.3     No waiver shall be effective unless made in writing, agreed and signed
         on behalf of the party so granting the waiver.

13       NOTICES

13.1     Any notice, request or other communication required to be given under
         this Agreement shall be made in the English language, in writing, and

                                       21
<PAGE>

         may be hand-delivered or sent by pre-paid first class post, or
         facsimile transmission, to the recipient at the address first set out
         in this Agreement (or such other address as either party may specify by
         prior written notice to the other for this purpose) and marked for the
         attention of the following respective recipients:-

         13.1.1   in the case of notice served upon Boots, to the Managing
                  Director,, at the same address; and

         13.1.2   in the case of a notice served on BioProgress, Managing
                  Director BioProgress Technology Limited at the same address.

13.2     Subject to Clause 13.3, notice shall be deemed to have been received:-

         13.2.1   if delivered by hand, on the date of delivery; or

         13.2.2   if sent by post, on the second Working Day after the date of
                  posting; or

         13.2.3   if sent by facsimile, on the date of transmission, provided
                  that the sender's apparatus has recorded the transmission as
                  having been successfully made.

13.3              Where, having regard to Clause 13.2, any notice would be
                  deemed to have been given on a day, which is not a Working
                  Day, or if the actual time of delivery or transmission is
                  after 1700 hours, that notice shall be deemed to have been
                  served on the next following Working Day.

                                       22
<PAGE>

13.4     It shall be sufficient in proving service that the letter containing
         the notice was properly addressed and, as the case may be, delivered,
         put in the post or transmitted.

14       ENTIRE AGREEMENT AND AMENDMENTS

14.1     This Agreement (together with any documents referred to herein)
         supersedes any preliminary or previous correspondence, negotiations,
         arrangements or agreements (except in the case of fraud) between, and
         represents the entire understanding of, the parties in relation to the
         matters specifically dealt with herein.

14.2     No amendment to or alteration of this Agreement shall be effective
         unless made in writing, agreed and signed by a duly authorised
         representative of each of the parties hereto.

15       APPLICABLE LAW AND SERVICE OF PROCESS

15.1     The construction, interpretation, meaning, validity and performance of
         this Agreement shall be governed by the laws of England, which is
         agreed to be the proper law of this Agreement.

15.2     The addresses of the parties for service of any process or documents
         required to be served by reason of law (or any rule, code or regulation
         having the force of law) in the United Kingdom are as follows:-

         15.2.1   in the case of Boots, the address of Boots as set out in the
                  heading to this Agreement, marked for the attention of [the
                  Company Secretary, with a copy to the Managing Director, Boots
                  Healthcare International; and

                                       23
<PAGE>

         15.2.2   in the case of BioProgress, the address of BioProgress as set
                  out in the heading to this Agreement, marked for the attention
                  of The Managing Director BioProgress Technology Limited.

15.3     The parties hereto submit to the non-exclusive jurisdiction of the
         English Courts.

16       INVALIDITY AND SEVERABILITY

16.1     If any provision of this Agreement shall be held unlawful, invalid or
         unenforceable in whole or in part by any court or competent authority,
         such provision shall be deemed severed and subject to Clause 16.2, the
         Agreement shall continue to be valid as to all other provisions, and
         the parties shall meet and negotiate in good faith a valid and
         enforceable replacement for the severed provision, which replacement
         shall be designed to achieve as nearly as possible the same commercial
         objective as the original.

16.2     In the event that, notwithstanding the performance of the parties of
         their obligations under Clause 16.1, the parties cannot agree upon a
         replacement provision within one (1) calendar month of the same being
         held unlawful, invalid or unenforceable, then either party may
         terminate this Agreement forthwith by notice in writing.

17       ANNOUNCEMENTS

         Neither party shall, without the prior written consent of the other
         (such consent not be unreasonably withheld) make any announcement or
         public statement, or make any other form of public disclosure
         (including, without limitation, the issuing of any press release)
         relating to or concerning this Agreement or any part thereof, or any
         activity carried on pursuant thereto.

                                       24
<PAGE>

         Provided that nothing in this Clause 17 shall prevent either party from
         making any announcement required by the rules of any stock exchange to
         which the party making such announcement is subject, in which event the
         party required to make such announcement shall use reasonable
         endeavours to agree with the other party the text of such announcement
         prior to disclosure, and shall in any event inform the other party of
         the requirement to make such disclosure prior to the making of the
         same.

IN WITNESS whereof this Agreement has been signed by the duly authorised
representatives of the parties the day and year first before written.

                                       25<PAGE>

                                                                   EXHIBIT 10.37

                               LICENSE AGREEMENT

                                    between

               CONVATEC, A DIVISION OF E.R. SQUIBB & SONS, L.L.C.

                                      and

                   BIOPROGRESS TECHNOLOGY INTERNATIONAL INC.

                                             Dated 27th August 2002

<PAGE>
<Table>
<Caption>

ARTICLE NUMBER                      TITLE                                  PAGE NUMBER
--------------                      -----                                  -----------
<S>                                <C>                                         <C>

      I.                            DEFINITIONS                                     4

      II.                           DISCLOSURE                                      7

      III.                          PRODUCT DELIVERY MILESTONE PROGRAM              7

      IV.                           GRANT OF LICENSE                                9

      V.                            ROYALTIES AND PERFORMANCE                      10

      VI.                           REPORTS                                        13

      VII.                          TIMES AND CURRENCIES OF PAYMENT                15

      VIII.                         INFRINGEMENT                                   16

      IX.                           PATENT APPLICATIONS                            18

      X.                            REISSUE                                        19

      XI.                           FUTURE DEVELOPMENTS                            21

      XII.                          PRODUCT TESTING AND COMPLIANCE                 21

      XIII.                         DEVELOPMENT RECOGNITION                        23

      XIV.                          CONFIDENTIALITY                                23

      XV.                           EFFECTIVE DATE AND TERM                        24

      XVI.                          TERMINATION FOR CAUSE                          25

      XVII.                         RIGHTS AND OBLIGATIONS UPON
                                    TERMINATION                                    26

      XVIII.                        ASSIGNMENT                                     27

      XIX.                          NOTICES                                        28

      XX.                           ENTIRE AGREEMENT AND AMENDMENTS                29

      XXI.                          GOVERNING LAW                                  29

      XXII.                         REVIEW AND COMMENT                             29
</Table>

                                       2
<PAGE>
                       DEVELOPMENT AND LICENSE AGREEMENT
                       ---------------------------------

This Agreement, made as of the 27th day of August, 2002 by and between
BioProgress Technology International, Inc. having an address of 9055 Huntcliffe
Trace, Atlanta, GA 30350 (hereinafter referred to as "LICENSOR") and CONVATEC, a
Division of E.R. Squibb & Sons, L.L.C., with offices at 200 Headquarters Park
Drive, Skillman, New Jersey 08558 USA (hereinafter referred to as "CONVATEC").

                                        WITNESSETH:

     WHEREAS, LICENSOR represents and warrants that it owns all of the right,
title and interest in and to certain patent rights and information pertaining
to a device (such rights and device hereinafter defined); and

     WHEREAS, LICENSOR and CONVATEC desire to undertake and complete a program
to provide Product based upon said device; and

     WHEREAS, CONVATEC is desirous of obtaining certain rights and licenses
from LICENSOR relating to the aforementioned patent rights and information; and

     WHEREAS, LICENSOR is willing to grant such licenses and rights

                                        3
<PAGE>
upon the conditions hereof;

     NOW THEREFORE, for and in consideration of the premises and the mutual
promises hereinafter contained, and other good and valuable consideration, the
parties hereto have mutually agreed as follows:

ARTICLE I. DEFINITIONS
----------------------

     The following terms as used in this Agreement shall, unless the context
clearly indicates to the contrary, have the meanings set forth in this Article:

     A.   "Device" shall mean the medical article described in Attachment A
          hereto.

     B.   "Licensed Patents" shall mean the patent(s) and/or patent
          application(s) specified in Attachment B hereto and any and all other
          patents and/or patent applications in the Territory now or hereafter
          during the term of this Agreement owned or controlled by LICENSOR and
          disclosing and claiming the Device, together with any and all patents
          that may issue or may have issued therefrom in the Territory including
          any and all renewals, divisions,

                                        4
<PAGE>
          continuations, continuations-in-part, confirmations, reissues,
          substitutions, registrations, revalidations, revisions, extensions
          or additions of or to any of the aforesaid patents and patent
          applications. From time to time during the term of this agreement,
          LICENSOR will provide CONVATEC, upon request, with an updated version
          of Attachment B.

     C.   "Net Sales Price" shall mean the gross invoice price at which Product
          is sold, less commissions allowed to distributors, discounts allowed
          dealers, cash discounts, refunds, replacements or credits allowed to
          purchasers for return of Product or as reimbursment for damaged
          Product, freight, postage, insurance and other shipping charges,
          sales and use taxes, customs duties and any other governmental charges
          imposed on the production, importation, use or sale of Product.

     D.   "Product" shall mean any device the manufacture, use or sale of which
          would, but for this Agreement, infringe a Valid Claim or any device
          incorporating, or the manufacture, use or sale of which utilizes
          Technology.

     E.   "Subsidiary" shall mean any corporation directly or indirectly owning,
          owned by, or under common ownership

                                        5
<PAGE>
     with the party in question to the extent of at least fifty percent (50%) of
     the voting shares, including directors' qualifying shares owned
     beneficially by such party, having the power to vote for directors.

F.   "Technology" shall mean all information, technical data, or other
     know-how which relates to the manufacture, use or sale of the Device
     (including clinical data, medical uses and methods, product forms,
     specifications and manufacturing data) which LICENSOR has heretofore
     developed or acquired, or may hereafter develop or acquire, and possesses
     at any time during the term of this Agreement and which LICENSOR is free to
     disclose and furnish to CONVATEC hereunder.

G.   "Territory" shall mean all countries of the world, without exception.

H.   "Valid Claim" shall be deemed to mean a claim pending in a patent
     application or in an unexpired patent included within the Licensed Patents
     which has not been held unenforceable, unpatentable or invalid by a
     decision of a court or other governmental agency of competent jurisdiction,
     unappealable or unappealed within the time

                                       6
<PAGE>
          allowed for appeal, and which has not been admitted to be invalid or
          unenforceable through reissue or disclaimer. If in any country there
          should be two or more such decisions conflicting with respect to the
          validity of the same claim, the decision of the higher or highest
          tribunal shall thereafter control; however, should the tribunals be of
          equal rank, then the decision or decisions upholding the claim shall
          prevail when the conflicting decisions are equal in number, and the
          majority of decisions shall prevail when the conflicting decisions are
          unequal in number.

ARTICLE II. DISCLOSURE
----------------------

          Promptly after the effective date of this Agreement and from time to
time thereafter during the term of this Agreement, LICENSOR shall, to the extent
that it has not already done so, disclose and furnish to CONVATEC, in writing or
other form acceptable to CONVATEC, Technology which is then known or possessed
by LICENSOR.

ARTICLE III. PRODUCT DELIVERY MILESTONE PROGRAM
-----------------------------------------------

          A.   Commencing upon the effective date of this Agreement, LICENSOR
               shall undertake a program to provide Product

                                       7

<PAGE>
based upon the Device described in Attachment A hereto and the Licensed
Patents described in Attachment B hereto. CONVATEC shall provide licensing
payments based upon the achievement of specific milestones by LICENSOR and
corresponding payments set forth below:

Upon signing of the License Agreement:
$*

Upon Delivery to CONVATEC of one thousand (1,000) clinical trial samples of
Product meeting the criteria of CONVATEC for use in human clinical trials,
including CE marking, plus provision of such market research materials as shall
be agreed by LICENSOR and CONVATEC: $*

Upon completion of final packaging and Product specifications and production of
inventory for first market(s) launch: $*

Upon first sale by CONVATEC of a Product in any country of the Territory: $*

These initial four (4) licensing payments will be made by electronic transfer
to the bank account of BioProgress

                                       8
<PAGE>
          Technology International Inc. as follows:
          Bank:               Bank of America
          Address:            8755 Roswell Road
                              Atlanta, GA  30350 USA
          Account Title:      BioProgress Technology International Inc.
          Account Number:     003261231908
          Routing Code:       061000052

          B.   CONVATEC may in its sole discretion determine to discontinue the
          licensing payments set forth in Article III, Paragraph A, above, at
          any time, in which case it shall notify LICENSOR in writing of its
          election to discontinue licensing payments and to conclude any further
          participation in the program, without penalty or further obligation of
          CONVATEC to LICENSOR. In the event of such a discontinuance of
          licensing payments, all rights of CONVATEC under the Licensed Patents
          granted by this Agreement shall immediately terminate and/or revert to
          LICENSOR, which shall have no further obligation to CONVATEC
          hereunder.

ARTICLE IV. GRANT
-----------------

                                        9
<PAGE>
     LICENSOR hereby grants to CONVATEC and its Subsidiaries an exclusive
worldwide license, including the right to grant sublicenses, under Licensed
Patents and to use Technology, to make, have made, use and sell Product.

ARTICLE V. ROYALTIES AND PERFORMANCE
------------------------------------

     A.   In consideration of the licenses and rights granted by LICENSOR to
          CONVATEC hereunder, CONVATEC will pay or cause to be paid to LICENSOR,
          for each calendar year or fraction thereof during the term of this
          Agreement, a royalty equal to the following percentages of the Net
          Sales Price of Product, the manufacture, use or sale of which is
          covered by a Valid Claim, sold by CONVATEC and its Subsidiaries and
          sublicensees:

               Upon yearly sales of Product
               up to and including $*:                      *%

               Upon yearly sales of Product
               exceeding $*
               up to and including $*:                      *%

               Upon yearly sales of Product
               exceeding $*:                                *%
<Table>
<Caption>

               MINIMUM ROYALTIES:
               <S>       <C>
               Year 1*   $*

               Year 2*   $*
</Table>

                                        10
<PAGE>
          *For purposes of the computation of minimum royalties, "Year 1" shall
          be deemed to include the first twelve (12) calendar months following
          first sale by CONVATEC of a Product in any country of the Territory
          and "Year 2" shall be deemed to include the next subsequent twelve
          (12) calendar months following "Year 1".

B.   The obligation to pay royalties to LICENSOR under this Article is imposed
     only once with respect to the same unit of Product regardless of the
     number of Valid Claims and Licensed Patents covering the same.  There
     shall be no obligation to pay LICENSOR under this Article on sales of
     Product between CONVATEC and its Subsidiaries and sublicensees or between
     any of them but in such instances the obligation to pay royalties shall
     arise upon the sale by CONVATEC or its Subsidiaries or sublicensees to
     unrelated third parties. Payments due under Paragraph A or this Article
     shall be deemed to accrue when Product is shipped or billed, whichever
     event shall first occur.

C.   If a patent or patents of a third party who is not a Subsidiary of
     CONVATEC should exist during the term of this Agreement in any country
     covering the manufacture,

                                       11
<PAGE>
     use or sale of any Product, and if it should prove, in CONVATEC's
     judgment, impractical or impossible for CONVATEC or its Subsidiaries or
     sublicensees to continue the activity or activities licensed hereunder
     without obtaining a royalty-bearing license from such third party under
     such patent or patents, then CONVATEC shall be entitled to a credit
     against the payments due hereunder of any amount equal to the royalty paid
     to such third party arising from the manufacture, use or sale of Product
     in said country.

D.   If at any time or from time to time a third party in any country shall,
     under right of a compulsory license granted or ordered to be granted by a
     competent governmental authority, manufacture, use or sell any Product
     with respect to which royalties shall be payable pursuant to Paragraph A
     of this Article, then CONVATEC, upon notice to LICENSOR and during the
     period such compulsory license shall be effective, shall have the right to
     reduce such royalty on each unit of Product sold in such country to an
     amount no greater than the amount payable by said third party in
     consideration of its compulsory license.

                                       12
<PAGE>
     E.   The royalty rates set forth in this Article V, Paragraph A, above,
          for Product sold in a country of the Territory shall be reduced by
          fifty percent (50%) in the event that at any time or from time to
          time a third party or third parties not having a license under the
          Licensed Patents from LICENSOR shall make, use or sell in any such
          country the Licensed Device; provided however, that such reduction
          shall be applicable only during such periods of manufacture, use or
          sale by such third party.

     F.   In the absence of a Licensed Patent covering a Product licensed to
          CONVATEC under this Agreement and notwithstanding any other
          provisions of this Agreement, the royalties payable under Paragraph A
          of this Article V shall terminate at any time LICENSOR ceases or is
          unable to provide the aid and assistance required in Article XII
          hereunder.

ARTICLE VI. REPORTS
-------------------

     Within ninety (90) days after the close of each calendar quarter of each
year during the term of this Agreement (including the last day of any such
calendar quarter following the expiration date of this Agreement), CONVATEC
shall report to LICENSOR all

                                       13
<PAGE>
payments actually accruing under Article V during such calendar quarter. Such
quarterly reports shall indicate for such calendar quarter the Net Sales Price
of the Product sold by CONVATEC and its Subsidiaries and sublicensees with
respect to which payment is due and the amount of such payment. In case no
payment is due for any such period, CONVATEC shall so report. CONVATEC shall
keep, and it shall cause its Subsidiaries and sublicensees to keep, accurate
records in sufficient detail to enable the aforesaid payment due under Article
V to be determined. Upon the request of LICENSOR, CONVATEC and its Subsidiaries
and sublicensees shall permit an independent certified public accountant
selected by LICENSOR to have access, once in each calendar year during regular
business hours and upon reasonable notice to CONVATEC, to such of the records
of CONVATEC and its Subsidiaries and sublicensees as may be necessary to verify
the accuracy of the reports made during the previous calendar year, except that:
said accountant shall meet the prior approval of CONVATEC or its Subsidiary or
its sublicensee in question, which approval shall not be unreasonably denied,
and; said accountant shall not disclose to LICENSOR any information except
that which should properly have been contained in such reports, and; said audit
right may not be exercised more than once in any one calendar year. The records
from which the royalty reports are prepared need not be retained by CONVATEC
longer than CONVATEC's then current records retention policy for such

                                        14
<PAGE>
documents.

ARTICLE VII. TIMES AND CURRENCIES OF PAYMENT
---------------------------------------------

     Payments shown to have accrued by each of the quarterly reports provided
for under Article VI above shall be due and payable on the date such report is
due shall be paid in United States Dollars, or at CONVATEC's election, in the
currency of the country in which the Product was sold. CONVATEC or its
Subsidiaries as agents for LICENSOR will deduct or withhold from such payments
and pay to the proper taxing authority all taxes or fees required by law or
regulation to be deducted or withheld with respect to such payments and proof of
payment secured and sent to LICENSOR as evidence of such payment. The rate of
exchange to be used in computing the amount of local currency equivalent to the
United States Dollars due to LICENSOR as royalty shall be the commercial
exchange rate in effect in New York, New York on the last business day of the
calendar quarter for which payment is being made. If at any time conditions or
legal restrictions exist in any country where Product is sold by CONVATEC or its
Subsidiaries or sublicensees, which legal restrictions prevent the prompt
remittance of the royalties due to LICENSOR, CONVATEC shall have the right and
option to make such payments by depositing the amount thereof, subject to an
appropriate adjustment due to the

                                        15
<PAGE>
inability to obtain appropriate tax deduction, in local currency to LICENSOR's
account in a bank or other depository selected by LICENSOR. CONVATEC shall be
excused from remitting such royalties in accordance with the provisions of this
Article during the pendency of such legal restrictions.

ARTICLE VIII. INFRINGEMENT
--------------------------

     A.   In the event that a third part appears to be infringing one or more of
          the Licensed Patents, CONVATEC shall bring such infringement to the
          attention of LICENSOR. If LICENSOR does not institute infringement
          proceedings against such third party within ninety (90) days after
          written notice from CONVATEC that such third party appears to be
          infringing one or more of the Licensed Patents, CONVATEC shall have
          the right to take whatever steps in its own and sole discretion it
          shall deem advisable, including but not limited to, settlement or the
          filing of suit for damages or to enjoin such sales or offers for sale
          by such third party. LICENSOR agrees to perform all acts which may
          become necessary or desirable to vest in CONVATEC the right to
          institute any such suit and shall, upon reasonable notice, cooperate
          and, to the

                                        16
<PAGE>
          extent deemed necessary or desirable by CONVATEC and at CONVATEC's
          expense, participate in any suit to enjoin such infringement and to
          collect, for the benefit of CONVATEC, damages, profits and awards of
          any nature recoverable for such infringement. The costs and expenses
          of such suit or settlement shall be borne by CONVATEC. Recovery of
          damages in any such suit or settlement with any third party shall
          inure to the benefit of CONVATEC; however, CONVATEC shall after first
          recouping its reasonable attorneys' fees and costs incurred in
          connection with such suit or settlement apply any excess recovered
          damages to reimbursing LICENSOR, to the extent of such excess, the
          royalties that would have been payable to LICENSOR but for application
          of Article V, Paragraph E, hereof.

     B.   LICENSOR agrees should a third party institute a patent infringement
          suit in any country of the Territory against CONVATEC or a Subsidiary
          or sublicensee of CONVATEC predicated on CONVATEC's or its
          Subsidiaries' or sublicensees' manufacture, use or sale of Product,
          CONVATEC shall have the right to reduce by fifty percent (50%)
          royalties due to LICENSOR in such country hereunder with respect to
          such Product. In the event such third

                                        17

<PAGE>
     party suit is successfully defended by CONVATEC, it shall, upon final
     determination thereof, pay to LICENSOR all royalties that would have been
     payable to LICENSOR if such suit had not been instituted, less reasonable
     attorneys' fees and costs incurred by CONVATEC in connection with such
     suit, which shall not exceed the total amount of royalties payable to
     LICENSOR by virtue of said successful defense and final determination.

ARTICLE IX. PATENT APPLICATIONS
-------------------------------

A.   CONVATEC shall have the right to have patent applications covering the
     Device filed at its own expense in those countries which CONVATEC in its
     sole discretion deems advisable in view of its commercial operations.
     LICENSOR agrees to execute or cause to be executed all documents necessary
     or desirable for the purpose of applying for and obtaining patents thereon.
     All such applications will be owned by LICENSOR.  LICENSOR shall control
     the prosecution of all patent applications within the Licensed Patents but
     shall provide or cause to be provided to CONVATEC a copy of all
     correspondence to and from the patent authorities of each country of the
     Territory in which such patent application has been

                                       18

<PAGE>
          filed, so as to afford CONVATEC sufficient time to comment and
          advise. The cost of filing patent applications in a country of the
          Territory where the filing was made by CONVATEC or at CONVATEC's
          request as well as the expense incurred by LICENSOR in prosecuting
          and in maintaining such application, shall be paid by CONVATEC.
          CONVATEC's obligation to pay for patent prosecution expenses shall
          not require CONVATEC to pay for expenses of prosecution or appeal
          other than in the patent office of the country concerned.

     B.   It is expressly understood and agreed that patent applications may be
          filed by LICENSOR at LICENSOR's expense in any country in which
          CONVATEC elects not to file a patent application and that all such
          patent applications filed by LICENSOR are included within the
          Licensed Patents.  LICENSOR shall advise CONVATEC of the filing of
          each such patent application and LICENSOR will cause same to be
          prosecuted diligently and in good faith at its own expense.

ARTICLE X. REISSUE
------------------

     In the event CONVATEC requests that LICENSOR file an

                                       19
<PAGE>
application for reissue of a Licensed Patent of the United States to correct an
infirmity and with such request, in support thereof, provides to LICENSOR a
written legal opinion of independent patent counsel, then LICENSOR within sixty
(60) days of receipt of such request shall either instruct patent counsel of
its choice to file such an application for reissue, or advise CONVATEC that it
chooses not to file such an application. If LICENSOR chooses not to file an
application for reissue, then LICENSOR and CONVATEC shall mutually agree upon
independent patent counsel, who shall review LICENSOR's request and reasons
given in support thereof and shall provide to LICENSOR and CONVATEC an opinion
as to the necessity or desirability for the filing of such an application.

     If such independent patent counsel selected by LICENSOR and CONVATEC
recommends that the application for reissue be filed and LICENSOR elects to
file for reissue, then LICENSOR shall direct patent counsel of its choice to
file such an application, and the cost of such independent counsel's opinion
and the costs of filing said application shall be shared equally by the
LICENSOR and CONVATEC. In the event that LICENSOR elects not to file for
reissue contrary to the recommendation of independent patent counsel, then
CONVATEC shall have the option to terminate this Agreement, or to convert the
exclusive license granted in Article III above to a non-exclusive license and
to reduce by one-half the

                                       20
<PAGE>
royalties provided for in Article IV above, effective upon the date CONVATEC
elects to convert the license to non-exclusive.

ARTICLE XI. FUTURE DEVELOPMENTS
-------------------------------

     LICENSOR will disclose to CONVATEC all improvements relating to the Device
which are invented, developed or otherwise acquired by LICENSOR during the term
of this Agreement.  CONVATEC shall automatically have, subject to all of the
terms and conditions of this Agreement but without any additional royalty, a
worldwide exclusive license, including the right to grant sublicenses, with
respect to and under any patents or patent applications which LICENSOR may
secure or file thereon or in connection therewith. All such patents and patent
applications shall be added to the Licensed Patents.  LICENSOR shall provide
CONVATEC with access to Technology developed or acquired by LICENSOR relating to
said Technology developed or acquired by LICENSOR relating to said
improvements and CONVATEC shall automatically have, subject to all the terms and
conditions of this Agreement but without any additional royalty, a worldwide
exclusive license to use such Technology.

ARTICLE XII. PRODUCT TESTING AND COMPLIANCE
-------------------------------------------
     At CONVATEC's request, LICENSOR shall aid and assist CONVATEC:

                                       21
<PAGE>
     (1)  in conducting laboratory and clinical evaluations of Product, and;

     (2)  in preparing accurate labels, labeling, and advertising for Product
          as those terms are defined in the Federal Food, Drug and Cosmetic
          Act, and;

     (3)  in securing the approval of any state or federal regulatory agency
          which approval may be necessary to commence or continue sales of
          Product, and;

     (4)  in defending Product before any state or federal regulatory agency
          which may seek to seize, ban or prevent the introduction of Product
          into commerce.

     It is agreed and understood by and between the parties that the foregoing
aid, education and assistance shall not be financial, but shall be given by way
of review of protocols, materials and data, personal consultations, preparation
of written statements, presentations and oral testimony. CONVATEC shall
reimburse LICENSOR for all reasonable out-of-pocket expenses which LICENSOR may
incur by reason of the foregoing and CONVATEC shall have the exclusive and sole
right to use or disclose information and data

                                       22

<PAGE>
resulting from such aid and assistance.  No honorariums will be paid for such
aid, education and assistance.

ARTICLE XIII. DEVELOPMENT RECOGNITION
-------------------------------------

     LICENSOR hereby grants to CONVATEC and its Subsidiaries the right to use
LICENSOR's name in labeling, advertising and promotional literature, to
acknowledge that Product was developed by or in cooperation with LICENSOR. Such
grant shall continue for so long as CONVATEC and its Subsidiaries shall
manufacture, distribute or sell Product in accordance with the terms of this
Agreement.

ARTICLE XIV. CONFIDENTIALITY
----------------------------

     Each party undertakes to keep secret and confidential and not to disclose
to any third party, except as it is necessary in carrying out the purpose of
this Agreement, during the term of this Agreement and for a period of five (5)
years thereafter any information, data or know-how disclosed to it by the other
party except:

     (1)  information, data and know-how which at the time of

                                       23
<PAGE>
          disclosure is in the public domain or publicly known or available;

     (2)  information, data or know-how which, after disclosure, becomes part
          of the public domain or publicly known or available by publication or
          otherwise, except by breach of this Agreement by the receiving party;

     (4)  information, data or know-how which the receiving party can establish
          by competent proof was in its possession at the time of disclosure by
          the other party;

     (4)  information, data and know-how which the receiver receives from a
          third party; provided, however, that such information was not obtained
          by said third party from the other party; and

     (5)  information, data and know-how which is derived by or on behalf of the
          receiver independently of such disclosure.

ARTICLE XV. EFFECTIVE DATE AND TERM
-----------------------------------

     A.   This Agreement will become effective on the day and year first written
          above and will remain in effect until and

                                        24
<PAGE>
          expire upon the expiration of the last to expire of the patents
          licensed hereunder. After such expiration of this Agreement, CONVATEC
          shall have the right to make, use and sell Product without the
          further payment of royalty of otherwise accounting to LICENSOR.

     B.   CONVATEC shall have the right to terminate this Agreement with respect
          to any country or countries upon sixty (60) days notice to LICENSOR.
          If CONVATEC should exercise such right to terminate this Agreement,
          CONVATEC's license under any patents or patent applications in such
          country or countries licensed under Article III hereof shall
          terminate, as shall its right to make further use in such country or
          countries of the Technology acquired from LICENSOR under this
          Agreement, and which CONVATEC is obliged to hold in confidence
          pursuant to Article XIII of this Agreement, either in Product sold in
          any such country or in manufacturing processes carried out in any such
          country.

ARTICLE XVI. TERMINATION FOR CAUSE
----------------------------------

     Failure by LICENSOR or CONVATEC or of any of its Subsidiaries to comply
with any of the obligations and conditions herein

                                        25
<PAGE>
contained, unless such failure results from or is caused by applicable laws or
regulations, shall entitle the other party to give to the party in default
notice requiring it to make good such default. If such default is not made good
within ninety (90) days after receipt of such notice, the notifying party shall
be entitled (without prejudice to any of its other rights conferred on it by
this Agreement) to terminate this Agreement by giving notice to take effect
immediately. The right of either party to terminate this Agreement, as
hereinabove provided, shall not be affected in any way by its waiver of, or
failure to take action with respect to, any previous default.

ARTICLE XVII. RIGHTS AND OBLIGATIONS UPON TERMINATION
-----------------------------------------------------

     Termination of this Agreement for any reason shall be without prejudice to:

     (1)  LICENSOR's right to receive all royalties accrued under Article V and
          unpaid on the effective date of such termination.

     (2)  the rights and obligations provided in Articles VI and

                                        26
<PAGE>
          XIV hereof, and

     (3)  any other remedies which either party may then or thereafter have
          hereunder or otherwise.

     Upon the termination of this Agreement prior to the completion of the term
provided for in Paragraph A of Article XV, CONVATEC may notify LICENSOR of the
amount of Product that CONVATEC, its Subsidiaries and sublicensees, then have on
hand and CONVATEC, its Subsidiaries and sublicensees, shall then be permitted
by LICENSOR to sell that amount of Product, but no more, provided that CONVATEC
shall pay royalties thereon at the rate and at the time herein provided and
render reports thereon in the manner herein provided.

ARTICLE XVIII. ASSIGNMENT
-------------------------

     CONVATEC may assign its rights under this Agreement in whole or in part
to any Subsidiary or Subsidiaries, which shall be substituted directly for it
hereunder. At CONVATEC's request, LICENSOR shall enter into a separate
counterpart agreement with any such Subsidiary. Such counterpart agreement
shall be in the same form as this Agreement except for any necessary change in
Licensed Patents to reflect the extent of the assignment, the substitution

                                        27
<PAGE>
of the Subsidiary's name, and the effective date of the assignment. This
Agreement shall not otherwise be assignable by either party without the prior
written consent of the other party, except by CONVATEC to the successor or
assignee of substantially all of its business related to medical products. It
is expressly understood and agreed, however, that the assignor of any rights
hereunder shall remain bound by the obligations hereof.

ARTICLE XIX. NOTICES
--------------------

     Any notice or report required or permitted to be given or made under this
Agreement by one of the parties hereto to the other shall be in writing and
shall be deemed to have been sufficiently given or made for all purposes if
mailed by registered mail, postage prepaid, addressed to such other party at
its respective address as follows:

To LICENSOR:  BioProgress Technology International Inc.
              9055 Huntcliffe Trace
              Atlanta, GA 30350 USA
              Attention: Managing Director, BioProgress
              Technology Ltd.

To CONVATEC:  ConvaTec, a division of E.R. Squibb & Sons, L.L.C.
              200 Headquarters Park Drive
              Skillman, New Jersey 08558  USA
              Attention:  Vice President, External Development

                                       28

<PAGE>
or to such other address as the addressees shall have theretofore furnished in
writing to the addressor.

ARTICLE XX.  ENTIRE AGREEMENT AND AMENDMENTS
--------------------------------------------

     This Agreement contains the entire understanding of the parties with
respect to the matter contained herein.  The parties hereto may, from time to
time during the continuance of this Agreement, modify, vary or alter any of the
provisions of this Agreement, but only by an instrument duly executed by both
parties hereto.

ARTICLE XXI.  GOVERNING LAW
---------------------------

     This Agreement shall be construed in accordance with the laws of the
United States, State of New Jersey.

ARTICLE XXII.  REVIEW AND COMMENT
---------------------------------

     CONVATEC and LICENSOR shall afford to one another reasonable opportunity
to review and comment upon any of their proposed press releases or other public
documents wherein the name of the other party is mentioned. Any such proposed
press release or other document shall be deemed to be Confidential Information
within the meaning of Article XIV of this Agreement until publicly released by
CONVATEC OR LICENSOR, as the case may be. This Article shall not require the
review and comment of LICENSOR upon Product promotional

                                       29
<PAGE>
materials of CONVATEC.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.

BioProgress Technology             CONVATEC, a Division of
International Inc.                 E.R. Squibb & Sons, L.L.C.

By: /s/ Graham Robert Mason Hind   By: /s/ Gary C. Restani
   -----------------------------      -----------------------------
        Graham Robert Mason Hind           Gary C. Restani
Title: Director                    Title: President
      --------------------------         --------------------------
Date:  Aug 27, 2002                Date: Aug 23, 2002
      --------------------------         --------------------------

WITNESS: /s/ Joe Muncaster
--------------------------------
J. Muncaster
53 The Oaks
Milton
Cambr
CB4 62G

                                       30
<PAGE>

                                  ATTACHMENT A
                                  ------------

drainage bag for receiving bodily waste, so constructed as to dissolve and
disperse in water after the application of a solvent, invented by LICENSOR, and
which is disclosed and claimed in the Licensed Patents specified in Attachment
B as of the date of execution of this Agreement.

                                       31
<PAGE>

                                  ATTACHMENT B
                                  ------------

                 United States Patent Number:  US 6,217,562 B1

                        Date of Patent:  April 17, 2001

OSTOMY1

WATER-DISPERSIBLE DISPOSABLE ENCLOSURE
--------------------------------------------------------------------------------
GB - GRANTED (SOLVENT INVENTION)
DIV GB9610947.5
APPN NO.  GB9906522.9
APPN DATE 23.3.99
PUBN NO. GB2333462
PUBN DATE 28.7.99
GRANT DATE 1.12.99
--------------------------------------------------------------------------------
US - GRANTED
APPN NO.  08/952,915
APPN DATE 24.5.96
GRANT NO. 6217562
GRANT DATE 17.4.2001
--------------------------------------------------------------------------------
EP - EXAMINED (SOLVENT INVENTION)
APPN NO. 96919913.2
APPN DATE 24.5.96
PUBN NO EP0833596
--------------------------------------------------------------------------------
WO - Examined
APPN NO. PCT/GB96/01267
APPN DATE 24.5.96
PUBN NO. WO 96/37171

Copies to be attached

                                       32
<PAGE>
                      FIRST AMENDMENT TO LICENSE AGREEMENT
                      -----------------------------------

     AND NOW, this 11th day of November, 2002, it is hereby agreed by and
between ConvaTec, a division of E. R. Squibb & Sons, L.L.C., 200 Headquarters
Park Drive, Skillman, New Jersey 08558 (hereinafter "CONVATEC") and BioProgress
Technology International, Inc., 9055 Huntcliffe Trace, Atlanta, GA 30350
(hereinafter "LICENSOR") as follows:

     WHEREAS, by the agreement of August 27, 2002 (hereinafter "Agreement") by
and between LICENSOR and CONVATEC, a program to provide Product (as that term
is defined in the Agreement) was established and LICENSOR granted to CONVATEC
certain rights and licenses relating to patent rights and information of the
LICENSOR concerning said Products; and

     WHEREAS, the LICENSOR and CONVATEC have undertaken their respective rights
and obligations under the said Agreement and continue to do so to date; and

     WHEREAS, the LICENSOR and CONVATEC wish to amend the Agreement of August
27, 2002 in certain particulars:

<PAGE>
     NOW THEREFORE, the License Agreement of LICENSOR and CONVATEC of August 27,
2002 is amended as follows, effective upon the date of execution specified
hereinabove:

     1.   ARTICLE III ("PRODUCT DELIVERY MILESTONE PROGRAM") of the Agreement is
          hereby amended so as to delete the language:

            "Upon Delivery to CONVATEC of one thousand (1000) clinical trial
            samples of Product meeting the criteria of CONVATEC for use in human
            clinical trials, including CE marking, plus provision of such market
            research materials as shall be agreed by LICENSOR and CONVATEC:
            $*"

          In the place of said deleted language shall be substituted the
          following language:

            "Upon complete execution of this First Amendment to License
            Agreement: $*

            Upon Delivery to CONVATEC of one thousand (1000) clinical trial
            samples of Product meeting the criteria of CONVATEC for use in human
            clinical trials, including CE marking, plus provision of such market
            research materials as shall be agreed by LICENSOR and CONVATEC:
            $*."

<PAGE>
     2.   The amended payments as provided for in paragraph One (1) of this
          First Amendment to License Agreement shall each be subject to the
          electronic transfer payment provision of Article III of the Agreement.

     3.   ATTACHMENT B (LICENSED PATENTS) to the Agreement is hereby amended so
          as to substitute the revised ATTACHMENT B (which is hereunto attached
          to this First Amendment to License Agreement) for the original
          version of ATTACHMENT B which was attached to the Agreement.

     4.   In all other respects, the Agreement of August 27, 2002 is affirmed
          and ratified.

     IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to License Agreement on the day first above written.

BIOPROGRESS TECHNOLOGY                            CONVATEC, a Division of
INTERNATIONAL, INC.                               E.R. Squibb & Sons, L.L.C.

    /s/ Graham Robert Mason Hind                      /s/ Gary C. Restani
By: ____________________________                  By: _________________________
                                                          Gary C. Restani

           Director                                          President
Title: _________________________                  Title:  _____________________

          14/11/2002
Date:  _________________________                  Date:   _____________________

WITNESS:
     /s/ [illegible]
_______________________________                   _____________________________

<PAGE>
                                  ATTACHMENT B

                  United States Patent Number: US 6,217,562 B1

                         Date of Patent: April 17, 2001

OSTOMY 1

WATER-DISPERSIBLE DISPOSABLE ENCLOSURE
--------------------------------------
GB - GRANTED (SOLVENT INVENTION)
DIV GB9610947.5
APPN NO. GB9906522.9
APPN DATE 23.3.99
PUBN NO. GB2333462
PUBN DATE 28.7.99
GRANT DATE 1.12.99
--------------------------------------
US - GRANTED
APPN NO. 08/952,915
APPN DATE 24.5.96
GRANT NO. 6217562
GRANT DATE 17.4.2001
--------------------------------------
EP - EXAMINED (SOLVENT INVENTION)
APPN NO. 96919913.2
APPN DATE 24.5.96
PUBN NO EP0833596
--------------------------------------

WO  Examined
APPN NO. PCT/GB96/01267
APPN DATE 24.5.96
PUBN NO. WO 96/37171
--------------------------------------

GB FILED (DRAINAGE BAG)
APPN NO. GB0121422.1
APPN DATE 5.9.01
--------------------------------------

PCT FILED (DRAINAGE BAG)
APPN NO PCT/GB02/04005
APPN DATE 30.8.02
PRIORITY APPN GB0121422.1
PRIORITY DATE 5.9.01
--------------------------------------

Copies to be attached

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