ROYALTY PURCHASE AGREEMENT BETWEEN NEUROSCIENCE PARTNERS LIMITED PARTNERSHIP BY ITS GENERAL PARTNER, MDS ASSOCIES-NEUROSCIENCE INC. - AND - APOLLO GENETICS, INC. DECEMBER 18, 1996

EXECUTION COPY

ROYALTY PURCHASE AGREEMENT

BETWEEN

NEUROSCIENCE PARTNERS
LIMITED PARTNERSHIP
BY ITS GENERAL PARTNER,
MDS ASSOCIES-NEUROSCIENCE INC.

- AND -

APOLLO GENETICS, INC.

DECEMBER 18, 1996

TABLE OF CONTENTS
PAGE NO.
ARTICLE 1 DEFINITIONS AND SCHEDULES....................................1
1.1 Definitions..................................................1
1.2 Schedules....................................................9

ARTICLE 2 PURCHASED RIGHTS.............................................9
2.1 Sale of Purchased Rights to the Fund.........................9
2.2 Payment of Royalties.........................................9
2.3 Maximum Royalties............................................9
2.4 Cash Payment Buyout..........................................10
2.5 Liabilities Not Assumed......................................11

ARTICLE 3 REPRESENTATIONS AND WARRANTIES...............................11
3.1 Representations and Warranties of Apollo.....................11
3.1.1 Corporate Matters..................................11
3.1.2 The Financial Statements...........................12
3.1.3 Undisclosed Liabilities............................12
3.1.4 Absence of Changes.................................12
3.1.5 Material Contracts.................................13
3.1.6 Absence of Conflicting Agreements..................14
3.1.7 Consents, Approvals, Etc...........................14
3.1.8 Compliance with Applicable Law.....................15
3.1.9 Litigation.........................................15
3.1.10 Purchased Rights...................................15
3.1.11 No Options.........................................15
3.1.12 Product Rights.....................................15
3.1.13 Non-Arm's Length Transactions......................17
3.1.14 Tax Returns........................................17
3.1.15 Authorized and Issued Share Capital................17
3.1.16 Disclosure.........................................18
3.2 Representations and Warranties of the Fund...................18
3.2.1 Corporate Matters..................................19
3.2.2 Absence of Conflicting Agreements..................19
3.2.3 Consents, Approvals, Etc...........................20
3.2.4 Investment.........................................20
3.2.5 Agreement For Sale.................................20
3.2.6 Investment Experience..............................20
3.2.7 Restricted Securities..............................20
3.2.8 Further Limitations on Disposition.................21
3.2.9 Legends............................................21
3.2.10 Laws of Funds Jurisdiction.........................22
3.3 Commission...................................................22
3.4 Non-Waiver...................................................22

3.5 Survival of Representations and Warranties...................22

ARTICLE 4 COVENANTS....................................................22
4.1 Covenants....................................................22
4.2 Non-Waiver and Audit.........................................28

ARTICLE 5 CONVERSION RIGHT.............................................29
5.1 Conversion Right.............................................29
5.2 Terms and Conditions Governing the Conversion Right..........29
5.3 Pro rata Reduction of Royalties..............................29
5.4 Paramountcy..................................................30

ARTICLE 6 DEFAULT......................................................30
6.1 Events of Default............................................30
6.2 Remedies.....................................................31

ARTICLE 7 INDEMNIFICATION..............................................32
7.1 Mutual Indemnifications for Breaches of Warranty, etc........32
7.2 Third Party Claims...........................................32

ARTICLE 8 CONFIDENTIALITY..............................................33
8.1 Confidential Information.....................................33
8.2 Non-Disclosure...............................................33

ARTICLE 9 DELIVERIES.ON.EXECUTION......................................34
9.1 Deliveries upon Execution of this Agreement..................34

ARTICLE 10 GENERAL......................................................35
10.1 Headings.....................................................35
10.2 Number and Gender............................................35
10.3 Entire Agreement.............................................35
10.4 Amendment....................................................35
10.5 Waiver of Rights.............................................35
10.6 Applicable Law...............................................36
10.7 Currency.....................................................36
10.8 Tender ......................................................36
10.9 Performance on Holidays......................................36
10.10 Financial Reporting Standards................................36
10.11 Expenses.....................................................36
10.12 Time.........................................................37
10.13 Notices......................................................37
10.14 Assignment...................................................38
10.15 Further Assurances...........................................39
10.16 Independent Parties..........................................39
10.17 Public Announcements.........................................39

iii

10.18 Severability.................................................39
10.19 Counterparts.................................................40
10.20 Facsimile Execution..........................................40

SCHEDULE A FORM OF WARRANTS
SCHEDULE B PATENT RIGHTS
SCHEDULE C INSTRUMENTS, CONTRACTS, LEASES, LICENCES, RIGHTS OR OTHER
AGREEMENTS RELATING TO THE TECHNOLOGY, THE PRODUCT RIGHTS,
THE PRODUCTS OR THE PURCHASED RIGHTS
SCHEDULE D TERMS AND CONDITIONS GOVERNING THE CONVERSION RIGHT
SCHEDULE E FORM OF SUBSCRIPTION AGREEMENT
SCHEDULE F FORM OF REGISTRATION RIGHTS AGREEMENT
SCHEDULE G FINANCIAL STATEMENTS
SCHEDULE H GRANTS AND OPTIONS

THIS AGREEMENT IS MADE AS OF THE 18TH DAY OF DECEMBER, 0000

X X X X X X X:

NEUROSCIENCE PARTNERS LIMITED PARTNERSHIP,
a limited partnership constituted under the laws of the
Province of Ontario

- and -

APOLLO GENETICS, INC.,
a corporation subsisting under the laws of Delaware

RECITALS:

1. Apollo is the licensee or proprietor of know-how, intellectual property
rights and materials relating to the use of estrogen in the treatment of
Chronic Neurodegenerative Diseases.

2. Apollo has agreed to sell and the Fund has agreed to purchase a portion of
the revenues generated from such know-how, intellectual property rights and
materials, on the terms provided in this Agreement.

IN CONSIDERATION of the premises, the mutual covenants in this Agreement and of
other good and valuable consideration (the receipt and sufficiency of which are
acknowledged by each Party), the Parties agree as follows:

ARTICLE 1
DEFINITIONS AND SCHEDULES

1.1 DEFINITIONS

In this Agreement:

"$.70 WARRANTS" means warrants to acquire 350,000 Apollo Common Shares for
a price of US$ .70 per Apollo Common Share for a period of 7 years from the
date of execution of this Agreement in the form and on the terms and
conditions attached hereto as Schedule A to be issued and delivered by
Apollo to the Fund on execution of this Agreement;

"$.875 WARRANTS" means warrants to acquire 150,000 Apollo Common Shares for
a price of US$ .875 per common share for a period of 7 years from the date
of execution of this Agreement in the form and on the terms and conditions
attached hereto as Schedule A to be issued and delivered by Apollo to the
Fund on execution of this Agreement;

"AFFILIATE" means a Person which, directly or indirectly, controls, is
controlled by or is under common control with another, it being understood
and agreed that Athena Neurosciences, Inc. and Endocon, Inc. (including its
successor pursuant to the merger transaction referred to at page 33 of the
Private Placement Memorandum) are not Affiliates of Apollo hereunder;

"AGGREGATE ROYALTIES" means, at any time, the aggregate dollar amounts paid
by Apollo to the Fund pursuant to item (i) and (ii) of the Purchased
Rights;

"AGREEMENT" means this agreement, the recitals, all attached schedules and
any agreement, exhibit or schedule supplementing or amending this
agreement. All uses of the words "hereto", "herein," "hereof," "hereby"
and "hereunder" and similar expressions refer to this Agreement and not to
any particular section or portion of it. References to an Article,
Section, Subsection, Exhibit or Schedule refer to the applicable article,
section, subsection, exhibit or schedule of this Agreement;

"APOLLO COMMON SHARES" means the shares of common stock, $.02 par value per
share, of Apollo as such shares are constituted on the date hereof, as the
same may be reorganized, reclassified or changed pursuant to a capital
reorganization or otherwise;

"APOLLO" means Apollo Genetics, Inc., its existing and future Affiliates,
and any successors of Apollo Genetics Inc. or such Affiliates (including
any successor by reason of amalgamation, merger or statutory arrangement of
Apollo Genetics Inc. and/or such Affiliates);

"APPLICABLE LAW" means, in respect of any Person, property, transaction or
event, any statute, law, ordinance, rule, regulation, regulatory policy,
by-law, order, judgment, decree or restriction of any kind whatever
applicable to that Person, property, transaction or event;

"ATHENA AGREEMENT" means the Licence and Collaboration Agreement dated
April 16, 1996 between Apollo and Athena Neurosciences, Inc.;

"BOARD" means the board of directors of Apollo;

"BUSINESS DAY" means any day of the week other than a Saturday, Sunday or
statutory or civic holiday observed in Toronto, Ontario or Cambridge,
Massachusetts;

"BUSINESS" means the business of Apollo relating to the Technology as has
been carried on by it prior to the date hereof and as may be carried on by
it hereafter;

"CHRONIC NEURODEGENERATIVE DISEASE" means any chronic neurodegenerative
disease or condition in which the anticipated treatment regimen is at least
six months; e.g., Alzheimer's disease;

"CLAIMS" has the meaning assigned thereto in Article 7;

"CLOSING DOCUMENT" means any document, instrument, undertaking or agreement
made pursuant to or in connection with this Agreement;

"CONFIDENTIAL INFORMATION" means any information that is so designated by
the Parties, or deemed to be such under this Agreement and any information
that is disclosed by or on behalf of Apollo on the one hand or by or on
behalf of the Fund on the other hand (the "disclosing party") to,
respectively, the Fund or Apollo (the "receiving party") including all
Know-How, except information which, as established by reasonable proof by
the receiving party:

(i) is already known to the receiving party;

(ii) is or becomes part of the public domain by publication or
otherwise without any breach of this Agreement;

(iii) has been published or is otherwise in the public knowledge
or is generally known to the public at the time of its
disclosure to the receiving party or that is thereafter
obtained from another source acting in good faith without
any breach of this Agreement; or

(iv) was not obtained from another source and can be demonstrated by
the receiving party to have been known or available to or
independently developed by the receiving party before disclosure
to the receiving party;

"CONTROL" (including, with correlative meanings, the terms "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") when used to indicate a relationship with
any Person means the possession of the power, in

law or in fact, to direct or cause the direction of the management and
policies of a Person, whether through legal and beneficial ownership of a
majority of voting securities or other equity interests, by agreement or
otherwise;

"CONVERSION RIGHT" means the right of the Fund to convert all or part of
the Royalties into Apollo Common Shares as set out in Article 5 and
Schedule D hereof;

"DIRECT SALES REVENUE" means the gross amount actually received by Apollo
during the Term, determined in accordance with GAAP, from or in respect of
the sale by Apollo of Products before any expenses or costs less Sales
Taxes and normal returns and allowances for damaged and outdated product
but excluding all Fees and Income;

"DISTRIBUTION" means the development, marketing, sale, distribution,
licensing, sub-licensing or other method of exploiting the Technology
including the provision of services in relation thereto and "DISTRIBUTING"
and "DISTRIBUTE" shall have corresponding meanings;

"ENCUMBRANCE" means any encumbrance of any kind whatsoever, actual or
contingent, fixed or floating, including any security interest, mortgage,
lien, hypothec, pledge, hypothecation, assignment, charge, trust or deemed
trust (whether contractual, statutory or otherwise arising) or any other
right or claim of others of any kind whatsoever;

"ENDOCON AGREEMENT" means the Research and Collaboration Agreement between
Apollo and Endocon, Inc. made as of the 1st day of June, 1994, as amended
by a letter agreements dated February 1, 1996 and December 16, 1996;

"EVENT OF DEFAULT" has the meaning assigned thereto in Article 6;

"FEES AND INCOME" means the gross amount received by Apollo during the
Term, determined in accordance with GAAP, derived from or in respect of the
Technology other than Direct Sales Revenue including: [*]

* Confidential treatment has been requested for marked portion.

5
[*]

"FINANCIAL STATEMENTS" means the audited financial statements of Apollo
dated December 31, 1995 and the unaudited financial statements for the 9
month period ending September 30, 1996, all as attached hereto as Schedule
G;

"FINANCING" means the raising of funds by Apollo by issuance of additional
Apollo Common Shares or securities convertible into or exchangeable for
Apollo Common Shares;

"FUND" means Neuroscience Partners Limited Partnership, its existing and
future Affiliates, and any successors of Neuroscience Partners Limited
Partnership or such Affiliates (including any successors by reason of
amalgamation, merger or statutory arrangement of Neuroscience Partners
Limited Partnership and/or such Affiliates);

"GAAP" means generally accepted accounting principles from time to time
approved by the American Institute of Public Chartered Accountants, or any
successor institute, applicable as at the date on which any calculation or
determination is required to be made in accordance with generally accepted
accounting principles, and where the American Institute of Public Chartered
Accountants includes a recommendation in its Handbook concerning the
treatment of any accounting matter, such recommendation shall be regarded
as the only generally accepted accounting principle applicable to the
circumstances that it covers;

"GOVERNMENTAL AGENCY" means any domestic or foreign government whether
federal, provincial or municipal and any governmental agency, governmental
authority, governmental tribunal or governmental commission of any kind
whatever;

"INCLUDING", when used herein or in any Closing Document, means "including
without limitation" and shall not be construed to limit any general
statement which it follows to the specific or similar items or matters
immediately following it;

"INDEMNIFIED PARTY" has the meaning assigned thereto in Article 6;

* Confidential treatment has been requested for marked portion.

"INDEMNIFYING PARTY" has the meaning assigned thereto in Article 6;

"INDEMNITY NOTICE" has the meaning assigned thereto in Article 6;

"INITIAL PUBLIC OFFERING" shall mean the initial public offering of Apollo,
a reverse take-over or any other event pursuant to which securities of
Apollo become listed and posted for trading on any stock exchange or
qualified for unlisted trading privileges on any trade reporting and
quotation system for over-the-counter trading;

"KNOW-HOW" means all technical, scientific, medical or other information,
trade secrets, know-how, pre-clinical, clinical, pharmacological,
Distribution, manufacturing or other data, concepts, ideas, experimental,
medical or manufacturing methods and procedures, testing results, assays,
formulations, depictions, descriptions, business or scientific plans,
marketing studies and plans, customer lists and any other written, printed
or electronically stored materials, pharmaceutical compounds and any other
natural or man-made pharmaceutical materials and any other intellectual
property including the Patent Rights invented, developed, controlled or
acquired prior to or during the Term by or on behalf of Apollo related to
the Technology;

"NOTICE" has the meaning assigned thereto in Section 9.13;

"PARTIES" means Apollo and the Fund, collectively, and "PARTY" means any
one of them;

"PATENT RIGHTS" means all patents and patent applications set forth in
Schedule B and all other patents and patent applications applied for, filed
by or issued, licensed or assigned to or under the control of, Apollo in
which an estrogen issued for the treatment of Chronic Neurodegenerative
Diseases and all improvements thereto made by Apollo during the Term or in
respect of which Apollo, during the Term, has any right, licence, title or
interest including all divisions, continuations, partial continuations,
extensions, substitutions, confirmations, registrations, revalidations,
additions or reissues of or to any of such patents or patent applications;

"PERSON" includes an individual, body corporate, partnership, joint
venture, cooperative, trust or unincorporated organization, the Crown or
any agency or instrumentality thereof, or any other entity recognized by
law;

"PRIME RATE" for any day means the rate of interest expressed as a rate per
annum that Royal Bank of Canada establishes at its head office in Toronto,
Ontario as a reference rate of interest that it will charge on that day for
Canadian Dollar demand loans to its corporate customers in Canada and which
it at present refers to as its prime rate;

"PRIVATE PLACEMENT MEMORANDUM" means the confidential Private Placement
Memorandum of Apollo dated June 19, 1996;

"PRODUCT RIGHTS" means the Know-How, Patent Rights and Trade Marks;

"PRODUCTS" means all forms and dosages of any product, system or service
and any enhancements, substitutions or improvements thereof derived from or
relating to the Technology and Distributed during the Term and "PRODUCT"
means any one of them;

"PURCHASED RIGHTS" means:

(i) the right to receive [*]% of all Direct Sales Revenue;

(ii) the right to receive [*]% of all Fees and Income;

(iii) the granting and issuance to the Fund of the $.70 Warrants and
the $.875 Warrants;

(iv) the Conversion Right; and

(v) the registration rights to be granted to the Fund by Apollo pursuant
to the Registration Rights Agreement to be entered into pursuant to
Section 9.1(e).

"PURCHASE PRICE" has the meaning set forth in Section 2.1;

"REGISTRATION" with respect to any Product means the obtaining of all
approvals and authorizations under Applicable Law to legally manufacture,
package, and Distribute the relevant Product to end users for therapeutic
purposes and "REGISTERED" shall have a corresponding meaning;

"ROYALTIES" means the dollar amounts payable by Apollo to the Fund pursuant
to item (i) and (ii) of the Purchased Rights;

* Confidential treatment has been requested for marked portion.

"SALES TAXES" means all goods and services taxes, sales taxes, excise and
value added taxes assessed on sales of the Products under Applicable Law;

"TAX RETURNS" means all reports, returns and other documents filed or
required to be filed by Apollo in respect of Taxes or in respect of or
pursuant to any Applicable Law;

"TAXES" means all federal, provincial, state, municipal, foreign,
withholding or other taxes, imposts, levies, assessments and government
fees, charges or dues, lawfully levied, assessed or imposed under
Applicable Law;

"TECHNOLOGY" means Patent Rights and Know-How related to the use of
estrogen in the treatment and cure of Chronic Neurodegenerative Diseases,
including the Patent Rights and Know-How related to the Neurestrol,
Neuromidol and estrogen Novel Neurosteroids programs described in the
Private Placement Memorandum under the heading, "Research and Development
Programs";

"TERM" in respect of each Product and each country in the world, means the
period commencing on the date hereof and ending on the day that is the
later of: (i) ten (10) years after the day of first commercial sale of the
last form/dosage combination of the relevant Product to be Registered in
the relevant country by Apollo or by one of its licensees to a Third Party
customer in a bona fide arm's length transaction in the country; and (ii)
the expiry date of the last relevant Patent Right to expire in the relevant
country;

"THIRD PARTY" means any Person other than Apollo or the Fund;

"TRADE MARKS" means any and all trade marks, service marks or symbols,
trade devices, certification marks, trade or business names and
applications therefor in respect of or relating to the any Products, the
Product Rights or the Technology filed by or issued, licensed or assigned
to or under the control of, Apollo including Neurestrol and Neuromidol; and

"TRANSMISSION" means any electronic means of sending messages, including
facsimile transmission, which produces a paper record.

1.2 SCHEDULES

The following Schedules form part of this Agreement:

SCHEDULE DESCRIPTION OF SCHEDULE
A Form of Warrants
B Patent Rights
C Agreements
D Terms and Conditions Governing Conversion Right
E Form of Subscription Agreement
F Form of Registration Rights Agreement
G Financial Statements
H Grants and Options

ARTICLE 2
PURCHASED RIGHTS

2.1 SALE OF PURCHASED RIGHTS TO THE FUND

In consideration of the payment of five hundred thousand United States Dollars
by the Fund to Apollo (the "PURCHASE PRICE"), payable without increase or
deduction for or on account of any Taxes on execution of this Agreement, Apollo
hereby sells, assigns, issues, grants and transfers free and clear of all
Encumbrances throughout the Term, the Purchased Rights and agrees to pay to the
Fund the Royalties free and clear of all Encumbrances throughout the Term.

2.2 PAYMENT OF ROYALTIES

Apollo shall pay the Royalties to the Fund without increase or deduction for or
on account of any Taxes thirty (30) days after each March 31, June 30, September
30 and December 31 during the Term based on the Direct Sales Revenue, and Fees
and Income in respect of each such immediately preceding quarterly period.

2.3 MAXIMUM ROYALTIES

Apollo's obligation to pay Royalties shall terminate effective on the 1st day of
the then following calendar year in the event that Aggregate Royalties in
respect of the period ending on the last day of any of the calendar years set
out below are equal to or greater than the respective amounts set out below.
With respect to the years ending after December 31, 2007, the Parties agree to

negotiate in good faith appropriate Aggregate Royalties, consistent with this
Agreement, which shall set the maximum Royalties due. Notwithstanding any
automatic termination pursuant to this Section 2.3, Royalties shall accrue as
contemplated hereby until the date that Royalties up to and including the
last day of the relevant calendar year have been paid and become Aggregate
Royalties. Upon receipt of such Royalties, the obligation of Apollo to pay
Royalties shall terminate effective as of the 1st day of the relevant
calendar year.

[*]

2.4 CASH PAYMENT BUYOUT

Subject to Section 5.4, Apollo may terminate its obligation to pay Royalties by
notifying the Fund in writing on the first Business Day on or before November 30
in any of the calendar years set out in Section 2.3 above of its intention to do
so and paying, on the first date for payment of Royalties in the following
calendar year, by cash, certified cheque or bank draft payable to the Fund an
amount equal to the difference between the amount set out in Section 2.3 for the
relevant calendar year or agreed to for years subsequent to 2007 and the
Aggregate Royalties in respect of the period ending on the last day of the
relevant calendar year. Notwithstanding any notice of intention to terminate
the obligation to pay Royalties pursuant to this Section, Royalties shall accrue
as contemplated hereby until the date that the buyout cash payment is made to
the Fund in accordance herewith. Upon receipt of such payment, the obligation
of Apollo to pay Royalties shall terminate effective as of the 1st day of the
relevant calendar year.

* Confidential treatment has been requested for marked portion.

2.5 LIABILITIES NOT ASSUMED

By entering into this Agreement or any Closing Document, the Fund is not
assuming and shall not be responsible for any of the liabilities, debts or
obligations of Apollo whatsoever, whether present, future, contingent or
absolute and whether or not relating to the Technology, the Product Rights, the
Products or the Purchased Rights or to any other thing, including any and all
product liability and patent infringement claims relating to the Products or
Product Rights.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

3.1 REPRESENTATIONS AND WARRANTIES OF APOLLO

Apollo represents and warrants to the Fund as follows and acknowledges that the
Fund is relying on such representations and warranties in entering into this
Agreement:

3.1.1 CORPORATE MATTERS

(a) Apollo is a corporation duly incorporated, organized and validly
existing under the laws of its jurisdiction of incorporation. No
proceedings have been taken or authorized by Apollo or, to the best of
Apollo's knowledge, by any other Person, with respect to the
bankruptcy, insolvency, liquidation, dissolution or winding up of
Apollo.

(b) Apollo has all necessary power and capacity to execute and deliver,
and to observe and perform its covenants and obligations under, this
Agreement and the Closing Documents to which it is a party. Apollo
has taken all corporate action necessary to authorize the execution
and delivery of, and the observance and performance of its covenants
and obligations under, this Agreement and the Closing Documents to
which it is a party.

(c) This Agreement and each Closing Document to which Apollo is a party
has been duly executed and delivered by Apollo, and this Agreement and
each Closing Document to which Apollo is a party, constitutes a valid
and binding obligation of Apollo enforceable against it in accordance
with its terms, provided that enforcement may be limited by
bankruptcy, insolvency, liquidation, reorganization, reconstruction
and other similar

laws generally affecting enforceability of
creditors' rights and that equitable remedies such as specific
performance and injunction are in the discretion of the court from
which they are sought.

3.1.2 THE FINANCIAL STATEMENTS

The Financial Statements:

(a) have been prepared in accordance with GAAP, applied on a basis
consistent with that of the preceding periods, except that, in the
case of unaudited financial statements, they may not contain all of
the footnotes required by GAAP;

(b) are complete and accurate in all material respects;

(c) accurately disclose the assets, liabilities and financial position of
Apollo and the results of the operations of Apollo as at the dates
thereof and for the periods covered thereby; and

(d) contain or reflect adequate reserves for all liabilities and
obligations of Apollo, as at the date thereof.

No information has become available to Apollo that would render the Financial
Statements incomplete or inaccurate.

3.1.3 UNDISCLOSED LIABILITIES

Apollo has no liabilities of any kind except:

(a) liabilities disclosed or provided for in the Financial Statements or
the Private Placement Memorandum; and

(b) liabilities incurred in the ordinary course of business since
September 30, 1996 which are consistent with past practice and are
not, in the aggregate, material and adverse to the financial condition
or results of operations of Apollo.

3.1.4 ABSENCE OF CHANGES

Since September 30, 1996:

(a) Apollo has conducted its business in the ordinary course and has not
incurred any debt, obligation or liability out of the ordinary course
of business;

(b) there has not been any change in the financial condition or results of
operations of Apollo, other than changes in the ordinary course of
business, and such changes: (i) have not, either individually or in
the aggregate, been materially adverse; and (ii) have not had or are
not reasonably expected to have, either before or after the date
hereof, a material adverse effect on the financial condition of Apollo
or its future prospects; and

(c) there has not been any change in, creation of, termination, amendment
or revocation of any contract, lease, licence, patent or other
agreement or any damage, destruction, loss, labour dispute or other
event, development or condition of any character (whether or not
covered by insurance) which has had, or could have, a material adverse
affect on Apollo or its future prospects.

3.1.5 MATERIAL CONTRACTS

(a) Except for the patents and patent applications disclosed in
Schedule B and the instruments, contracts, leases, licences,
rights and other agreements disclosed in Schedule C, Apollo is
not a party to or bound by any instrument, contract, lease,
licence, right, patent or other agreement whatsoever, whether
oral or written, which relates to the Technology, the Product
Rights, the Products or the Purchased Rights. True, correct
and complete copies of all such instruments, contracts, leases,
licences, rights patents and other agreements have been
delivered to the Fund or its solicitors prior to the date hereof.

(b) The instruments, contracts, leases, licenses, rights and other
agreements disclosed in Schedule C are all in good standing
and in full force and effect with no amendments except as
disclosed in Schedule C and are valid and binding obligations
of the parties thereto enforceable in accordance with their
respective terms provided
that enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization, restructuring and other similar laws
affecting enforceability of creditors' rights and that equitable
remedies such as specific performance and injunction are in the
discretion of the court from which they are sought. Each of the
parties thereto has complied with all material terms thereof,
has paid all amounts due thereunder, has not waived any rights
or defaults thereunder and no default or breach exists in respect
thereof on the part of any of the parties thereto and no event has
occurred which, after the giving of notice or the lapse of time or
both, would constitute such a default or breach.

3.1.6 ABSENCE OF CONFLICTING AGREEMENTS

None of the execution and delivery of, or the observance and performance by
Apollo of, any covenant or obligation under this Agreement or any Closing
Document to which it is a party, or the consummation of any of the transactions
contemplated hereby or thereby:

(a) contravenes or results in, or will contravene or result in, a
violation of or a default under (with or without the giving of notice
or lapse of time, or both) or in the acceleration of any obligation
under:

(i) any Applicable Law;

(ii) the certificate of incorporation, memorandum of association,
articles of association, by-laws, directors' or shareholders'
resolutions of Apollo; or

(iii) any instrument, contract, lease, license, right or other
agreement to which Apollo is a party, or by which it is bound or
affected; or

(b) result in the creation or imposition of any Encumbrance on Apollo or
on the Purchased Rights.

3.1.7 CONSENTS, APPROVALS, ETC.

No consent, approval, licence, order or authorization, registration,
declaration or filing with or of any Governmental Agency or other Person is
required by Apollo, in connection with:

(a) the execution and delivery by Apollo of this Agreement and the Closing
Documents to which it is a party;

(b) the observance and performance by it of its obligations under this
Agreement and the Closing Documents to which it is a party; or

3.1.8 COMPLIANCE WITH APPLICABLE LAW

Apollo has conducted and is conducting Business in compliance with all
Applicable Law in all material respects, and not in breach of any Applicable
Law, except for breaches which in the aggregate are not material.

3.1.9 LITIGATION

There is no claim, demand, suit, action, cause of action, dispute,
proceeding, litigation, investigation, grievance, arbitration, governmental
proceeding or other proceeding including appeals and applications for review,
in progress against, by or relating to Apollo, nor, to the best of Apollo's
knowledge, are any of the same pending or threatened. There is not presently
outstanding against Apollo any judgment, decree, injunction, rule, order or
award of any court, Governmental Agency or arbitrator that may adversely
affect the Technology, the Product Rights, the Products, the Purchased Rights
or Apollo in any way.

3.1.10 PURCHASED RIGHTS

Apollo is entitled to sell, assign, issue, grant and transfer the Purchased
Rights and pay the Royalties to the Fund as herein contemplated. Except as
contemplated by this Agreement or as disclosed in Schedule H, there has been
no sale, conveyance, assignment or granting of any licences, royalties,
options or similar rights to or the creation of any Encumbrance on or in
respect of any of the Purchased Rights in favour of any other Person.

3.1.11 NO OPTIONS

No Person other than the Fund has any agreement, option, warrant or right, or
any right capable of becoming any of the foregoing, for the purchase of all
or any of Apollo's right, title or interest in the Technology, the Product
Rights, any of the Products or any of the Purchased Rights, except as
disclosed in Schedule H.

3.1.12 PRODUCT RIGHTS

(a) Schedule B sets forth a true and complete list of all Patent
Rights indicating which are owned by, are licensed to or under the
control of Apollo. The Product Rights are sufficient to
conduct the Business as it is being conducted. To the best of
Apollo's knowledge, the conduct of the Business does not
infringe upon or otherwise interfere with any patent, trade
xxxx, trade name, industrial design or copyright of any other
Person. Apollo is not aware of any infringement of, passing-off
related to, or other

interference with the Product Rights by any Person or any claim
by any Person that any of the Trade Marks are, or may be, invalid
or unenforceable or non-distinctive of Apollo.

(b) To the best of Apollo's knowledge:

(i) all patent applications of Apollo included as part of the Patent
Rights are currently pending before the applicable administrative
agencies and are being prosecuted by Apollo with reasonable
diligence;

(ii) each of the issued patents included as part of the Patent Rights
and each claim therein is valid and enforceable according to its
terms;

(iii) the Patent Rights are the only patents issued or pending in
any country in respect of the subject matter claimed in the
Patent Rights;

(iv) there have been no claims by any Third Party of infringing any
patent or other right of any kind;

(v) the inventions claimed in the Patent Rights are new, useful and
not obvious;

(vi) there has been no inequitable conduct or abuse of the Patent
Rights by or on behalf of Apollo or its predecessors in title, if
any, in respect of the Patent Rights;

(vii) neither Apollo nor any Third Party has filed any disclaimer
or made or permitted any other voluntary reduction in the scope
of the Patent Rights;

(viii) the inventions claimed in the Patent Rights may be practised
without infringing any patent or other right of any kind of any
Third Party; and

(ix) the Patent Rights and the inventions claimed in them have not
been dedicated to the public

3.1.13 NON-ARM'S LENGTH TRANSACTIONS

With respect to the Business:

(a) Apollo has not acquired or had the use of any property from any
employee, officer, director or shareholder of Apollo or any of their
respective associates (each, an "Insider"); and

(b) Apollo has not disposed of any such property to any Insider for
proceeds less than the fair market value.

3.1.14 TAX RETURNS

(a) Apollo has filed all Tax Returns on time and with the appropriate
Governmental Agencies for all fiscal periods ending prior to the date
hereof. Each such Tax Return was materially correct and complete.

(b) Apollo has paid all Taxes due and payable as reflected on its Tax
Returns and has paid all assessments and reassessments it has received
in respect of Taxes. The provisions for Taxes reflected in the
Financial Statements are sufficient to cover all liabilities for Taxes
that have been assessed against Apollo, whether or not disputed, or
are accruing and due in respect of the Business, its operations or
property during the periods covered by the Financial Statements and
all prior periods. Except to the extent provided for in the financial
statements, Apollo is not liable for any Taxes at the date hereof or
for the payment of any instalment in respect of Taxes due in respect
of its current taxation year.

(c) No reassessments of Taxes have been issued and are outstanding.
To the best of Apollo's knowledge, no Governmental Agency has
challenged, disputed or questioned Apollo in respect of Taxes
or of any Tax Returns. Apollo is not negotiating any draft
assessment or reassessment with any Governmental Agency.

3.1.15 AUTHORIZED AND ISSUED SHARE CAPITAL

(a) The authorized capital of Apollo consists of 20,000,000 shares
shares of common stock, $.02 par value per share (the "Common
Shares") and 4,000,000 shares of preferred stock, $.01 par value
per share (the "Preferred Shares") of which 13,267,843 Common
Shares (not including the Common Shares to be issued to the

Fund pursuant hereto) and no Preferred Shares have been validly
issued and are outstanding.

(b) Apollo has allotted and reserved, and there shall remain
unissued, out of its authorized capital a sufficient number of
common shares to satisfy the rights of purchase and issue granted
pursuant to the $.70 Warrants, the $.875 Warrants and the
Conversion Right.

(c) Upon due exercise of the $.70 Warrants, the $.875 Warrants and
upon receipt by Apollo of payment in respect of the exercise
thereof as provided for therein, and upon due exercise of the
Conversion Right, the Apollo Common Shares issued in respect
thereof will be duly and validly issued as fully paid and
non-assessable shares and will be issued in compliance with all
Applicable Laws including any securities law, rule, regulation
or regulatory policy applicable thereto.

3.1.16 DISCLOSURE

Except as otherwise disclosed herein and that Apollo has been advised that
the Endocon, Inc. transaction described at Page 33 of the Private Placement
Memorandum will not be completed, no representation or warranty made by
Apollo in this Agreement or in any Closing Document and no statement in the
Private Placement Memorandum contains any untrue statement of a material fact
or omits to state any material fact necessary to make any such
representation, warranty or statement not misleading, in light of the
circumstances under which it was made. Without limiting the scope of the
foregoing, Apollo is not aware of any change, event or occurrence that has
taken place or is pending that has, or in the future could have, a material
adverse effect on the value or ownership of the Purchased Rights or the
Business, including any pending or present change in any Applicable Law or
other requirement, including the obtaining or maintenance of permits,
licences or approvals, which has not been disclosed in this Agreement or the
Private Placement Memorandum.

3.2 REPRESENTATIONS AND WARRANTIES OF THE FUND

The Fund represents and warrants to Apollo as follows and acknowledges that
Apollo is relying on such representations and warranties in entering into
this Agreement:

3.2.1 CORPORATE MATTERS

(a) The Fund is a limited partnership duly formed under the laws of
the Province of Ontario. No proceedings have been taken or
authorized by the Fund or, to the best of the Fund's knowledge,
by any other Person, with respect to the bankruptcy, insolvency,
liquidation, dissolution or winding up of the Fund.

(b) The Fund has all necessary power and capacity to execute and
deliver, and to observe and perform its covenants and obligations
under, this Agreement and the Closing Documents to which it is a
party. The Fund has taken all action necessary to authorize the
execution and delivery of, and the observance and performance of
its covenants and obligations under, this Agreement and the
Closing Documents to which it is a party.

(c) This Agreement and each Closing Document to which the Fund is a
party has been duly executed and delivered by the Fund, and this
Agreement and each Closing Document to which the Fund is a party
constitutes, a valid and binding obligation enforceable against
it, in accordance with its terms; provided that enforcement may
be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws generally
affecting enforceability of creditors' rights and that equitable
remedies such as specific performance and injunction are in the
discretion of the Court from which they are sought.

3.2.2 ABSENCE OF CONFLICTING AGREEMENTS

None of the execution and delivery of, or the observance and performance by
the Fund of, any covenant or obligation under this Agreement or any Closing
Document to which the Fund is a party, or the consummation of the
transactions contemplated thereby, contravenes or results in, or will
contravene or result in, a violation of or a default under (with or without
the giving of notice or lapse of time, or both) or in the acceleration of any
obligation under:

(a) any Applicable Law;

(b) the limited partnership agreement of the Fund; or

(c) any instrument, contract, lease, license, right, patent or other
agreement to which the Fund is a party, or by which it is bound or
affected.

3.2.3 CONSENTS, APPROVALS, ETC.

No consent, approval, licence, order or authorization, registration, declaration
or filing with or of any Governmental Agency or other Person is required by the
Fund, in connection with:

(a) the execution and delivery by the Fund of this Agreement and the
Closing Documents to which it is a party;

(b) the observance and performance by the Fund of its obligations
under this Agreement and the Closing Documents to which it is
a party; or

3.2.4 INVESTMENT

The Fund is acquiring the $0.70 Warrants, the $.875 Warrants and the Apollo
Common Shares to be issued to the Fund upon exercise of the $.70 Warrants, the
$.875 Warrants and/or exercise of the Conversion Right (collectively, the
"Securities") for investment for the Fund's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and the Fund has no present intention of selling, granting any participation in,
or otherwise distributing the same.

3.2.5 AGREEMENT FOR SALE

The Fund does not have any contract, undertaking, agreement or arrangement with
any Person to sell, transfer or grant a participation to such Person or to any
other Person, with respect to any of the Securities.

3.2.6 INVESTMENT EXPERIENCE

The Fund acknowledges that it can bear the economic risk of its investment in
Apollo and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of the investment in the
Securities.

3.2.7 RESTRICTED SECURITIES

The Fund understands that the Securities it is purchasing are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from Apollo in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be

resold without registration under the SECURITIES ACT of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the Fund
represents that it is familiar with Rule 144, as presently in effect
thereunder, and understands the resale limitations imposed thereby and by the
Act.

3.2.8 FURTHER LIMITATIONS ON DISPOSITION

The Fund further agrees not to make any disposition of all or any portion of the
Securities unless:

(a) there is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in
accordance with such registration statement; or

(b) the Fund shall have notified Apollo of the proposed disposition and,
if reasonably requested by Apollo within 2 Business Days of delivery
of such notice, the Fund shall have furnished Apollo with an opinion
of counsel that such disposition will not require registration of such
shares under the Act. It is agreed that Apollo will not require
opinions of counsel for transactions made pursuant to Rule 144 or Rule
144A, except in unusual circumstances.

3.2.9 LEGENDS

It is understood that the certificates evidencing the Apollo Common Shares to be
issued to the Fund may bear one or all of the following legends:

(a) "The shares represented by this certificate have not been registered
under the Act, or any state securities law and may not be transferred
except (i) pursuant to an effective registration statement under the
Act or (ii) upon first furnishing to the Company an opinion of counsel
that such transfer is not in violation of the registration
requirements of the Act or any state securities law."

(b) Any legend required by the securities laws of the Commonwealth of
Massachusetts or by any other securities laws of other states with
which the Company and the Fund must comply in order to distribute the
Apollo Common Shares pursuant to this Agreement.

3.2.10 LAWS OF FUNDS JURISDICTION

The Fund has satisfied itself as to the full observance of the laws of such
its jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including: (i) the legal
requirements of such jurisdiction for the purchase of the Securities; (ii)
any foreign exchange restrictions applicable to such purchase; (iii) any
governmental or other consents that may need to be obtained; and (iv) the
income tax and other tax consequences, if any, which may be relevant to the
purchase, holding, redemption, sale, or transfer of the Securities.

3.3 COMMISSION

Each Party represents and warrants to the other that the other Party will not
be liable for any brokerage commission, finder's fee or other like payment in
connection with the transactions contemplated hereby because of any action
taken by, or agreement or understanding reached by, that Party.

3.4 NON-WAIVER

No investigations made by or on behalf of the Fund at any time shall waive,
diminish the scope of or otherwise affect any representation or warranty made by
Apollo herein or pursuant hereto.

3.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES

All representations and warranties made in Sections 3.1.1 to 3.1.9, inclusive,
Sections 3.1.13 to 3.1.16, inclusive and Sections 3.2.1 to 3.2.3, inclusive of
this Agreement or in any Closing Document shall survive for three years after
the date of execution of this Agreement. The representations and warranties
made by Apollo in Sections 3.1.10 to 3.1.12, inclusive, shall survive until one
year after the expiration of the Term. After such period, neither Party shall
have any further liability hereunder with respect to such representations and
warranties except with respect to claims properly made within such period.

ARTICLE 4
COVENANTS

4.1 COVENANTS

During the Term, Apollo shall, at its own expense, act as follows:

(a) NON-ARM'S LENGTH TRANSACTIONS - In the event that any Affiliate
becomes entitled to receive any revenue or payments of

the type defined by Direct Sales Revenue or Fees and Income (as
such definitions are modified to be applicable to such
Affiliate), then Apollo shall cause such Affiliate to execute an
agreement in form and substance reasonably satisfactory to the
Fund obligating such Affiliate to be bound by all obligations of
this Agreement and, without any payment by the Fund to Apollo or
the Affiliate, Apollo shall cause such Affiliate to perform such
obligations and Apollo shall indemnify the Fund in respect
thereof (including the obligation to pay the Fund the Royalties)
whether or not any such agreement is entered into;

(b) REPORTING - Apollo shall:

(i) provide the Fund, concurrent with the delivery of each quarterly
payment of Royalties referred to in Section 2.2, with a report
detailing: (1) the Direct Sales Revenue and Fees and Income for
the relevant quarterly period; and (2) each agreement and licence
relating to the Technology, the Product Rights or the Products
entered into, amended, modified or terminated in such quarterly
period by Apollo, with the names of the parties thereto and a
summary of the financial terms thereof together with a
certificate of a senior officer of Apollo certifying the accuracy
of such information. The Fund agrees to enter into any
non-disclosure agreements that Apollo may reasonably request
to carry out its obligations under this clause 4.1(b)(i)(2);

(ii) provide the Fund with (1) quarterly unaudited financial
statements no later than forty-five (45) days after the end
of each fiscal quarter; and (2) the annual audited
financial statements and such other financial information
and management reports, including budgets, business
development, marketing and strategic plans relating to
the Technology, the Products or the Product Rights as are
provided to the Board, at the same time that such
information is provided to the Board. It is agreed by the
Parties that Apollo's obligations under this Section
4.1(b)(ii) following the Initial Public Offering shall be
fulfilled by the delivery to the Fund of all documents
required by Applicable Law to be sent to shareholders at
the same time that those documents are sent to shareholders;
and

(iii) prepare all such financial statements in accordance with
GAAP.

The information contained in the above reports shall be deemed to
be Confidential Information hereunder.

(c) MANAGEMENT MEETINGS - If so requested by the Fund and
provided that no nominee of the Fund is a member of the Board,
senior officers of Apollo shall, up to four times annually, meet
with representatives of the Fund at a mutually convenient time
and place to discuss the clinical development plans, business
plans, budgets, expansion activities, financial results and
projections, sales and marketing results, projections, activities
and prospects in an open and xxxxx manner as they relate to the
Technology, the Product Rights and the Products and shall, at
such meetings, provide the Fund with the information conveyed by
any licensees of Apollo as part of their reporting obligations to
Apollo, provided disclosure of such information is not precluded
by confidentiality obligations contained in the Agreements with
such other licensees. Information disclosed pursuant to this
Subsection shall be deemed to be Confidential Information
hereunder.

(d) NO SALE - Apollo shall not sell, assign, transfer or
otherwise dispose of or create any Encumbrance on any of its
right, title or interest in any of the Technology, the Product
Rights or the Products or amend any existing instrument,
contract, lease, licence, sub-licence, right or other agreement
pertaining thereto without: (i) giving the Fund at least 2
Business Days written notice of the commencement of serious
discussions setting forth the proposed terms and proposed
purchaser; (ii) giving the Fund at least 10 Business Days
detailed written notice of the proposed terms and proposed
purchaser; and (iii) obtaining the Fund's prior written consent
which will not be unreasonably withheld or delayed, provided the
Fund is satisfied with the credit worthiness of the purchaser,
the consideration is payable in cash only prior to the end of the
Term, it being acknowledged and agreed that the Fund has
consented to the Athena Agreement and the Endocon Agreement.

(e) TRANSACTIONS WITH AFFILIATES - In the event that any Affiliate
of Apollo becomes entitled to Distribute the Product Rights or
Products, then Apollo shall cause such Affiliate to execute and
deliver an agreement in form and substance satisfactory to the
Fund obligating such Affiliate to be bound by all of the

obligations of Apollo pursuant to this Agreement, with respect
to the relevant Product Right or Product. Apollo unconditionally
guarantees to the Fund the due and timely payment and performance
of all such obligations, including the obligation to pay the Fund
the Royalties, whether or not any such agreement is entered into.

(f) INSURANCE - During the term of this Agreement and for thirty (36)
months thereafter, Apollo shall:

(i) maintain at its expense all insurance types that are
common and applicable to its business, including but not
limited to general liability, workers compensation and
Directors and Officers insurance as well as keyman life
insurance for its chief executive officer. In addition,
Apollo shall use its best efforts to purchase product
liability insurance during the period covering any
clinical trials on reasonably commercial terms and shall
purchase or obtain product liability insurance coverage
during the period covering any Distribution of Products or
Product Rights and any manufacture by Apollo of Products
directly or through contractors or subcontractors. Apollo
shall cause the Fund to be named as an additional insured
on all such product liability insurance and shall supply to
the Fund all documents related to insurance reasonably
requested from time to time by the Fund, including evidence
of Apollo's compliance with the foregoing, copies of
policies, suitable certificates from Apollo's insurers to
the effect that such insurance coverage designates the Fund
as an additional insured and proof of premium payments.
Furthermore, Apollo shall, on a periodic basis update the
Fund as to the status of all insurance as described above;

(ii) obtain an undertaking from its product liability insurers to
the effect that all insurance coverage herein above
described shall not be permitted to lapse by default to pay
premiums without having first given a minimum of sixty (60)
days written notice to the Fund of such default. The Fund
reserves the right to pay
such premiums to keep such insurance coverage in full force and
effect and, in the event of so doing, Apollo shall reimburse the
Fund for all such premium payments and interest thereon at the
Prime Rate plus one percent (1%) annually, payable monthly and
calculated from (and including) the date

payment is due to the date of payment by Apollo and both
before and after judgment.

If:

(i) Apollo fails to furnish proof of such insurance as required
above; or

(ii) at any time during the term of this Agreement and for
thirty-six (36) months thereafter, the Fund is notified of
the change, cancellation or lapse of such insurance, which
change, cancellation or lapse is not rectified by Apollo
within ten (10) days of the insurance status change,

then the Fund, in addition to all other remedies available to it
hereunder, may at its option obtain such insurance coverage and
Apollo shall reimburse the Fund for the premium cost therefor.
Apollo shall remit such premium cost to the Fund within ten (10)
days of receipt of notice from the Fund of the amount of such
premium cost. Notwithstanding the provision of insurance hereunder
by Apollo, Apollo agrees to indemnify and save harmless the Fund
from and against any Claims arising out of the death of or injury to
any Person or out of any damage to property resulting from the
Distribution, use, consumption or advertisement of the Technology,
Product Rights or Products.

(g) COMPLIANCE WITH LAWS - Apollo shall comply with all
Applicable Laws with respect to the Technology, the Product
Rights, the Products, the issuance of any Apollo Common Shares
to the Fund pursuant to the $.70 Warrants, $.875 Warrants or
the Conversion Right and the operation of the Business and its
business generally.

(h) MAXIMIZE RETURNS - Apollo shall use its best business judgement,
consistent with reasonable business practices, to maximize the
Royalties by diligently seeking to obtain Registration for the
Products and by diligently Distributing the Products.

(i) BOOKS AND RECORDS - Apollo shall maintain at its usual place of
business up-to-date records, reports, accounts, books and files
which shall accurately reflect all particulars pertaining to the
Product Rights, the Products and the calculation of Royalties.

(j) BOARD OBSERVER STATUS - Unless the Fund has a duly elected
representative as a member of the Board, the Fund shall be
entitled, and Apollo shall permit the Fund, to have a nominee
participate in all Board meetings as an observer. The Fund may,
from time to time by written notice given to Apollo, designate a
nominee to be an observer at Board meetings. Until otherwise
notified in writing, the Fund's nominee shall be Xxxxxxx
Xxxxxxxxx. Apollo shall:

(i) notify the Fund of all Apollo Board meetings at the same
time and in the same manner that the directors of Apollo are
so notified. The Board shall meet a minimum of 4 times
annually; and

(ii) provide the Fund with a copy of all material and other
communication (including Board minutes and resolutions) given to
the directors of Apollo at the same time and in the same manner
that the directors are given such material or other
communication.

(k) ADDITIONAL FINANCINGS - Apollo shall provide the Fund with at least
30 days prior notice of any proposed new Financing. Except for the
Initial Public Offering, the Fund will be entitled at its sole option
to participate in any Financing on the most favorable terms and
conditions offered to any other potential investor, pro rata, in the
proportion that the number of Apollo Common Shares it holds or may
acquire pursuant to the $.70 Warrants, the $.875 Warrants and the
Conversion Right is to the number of issued Apollo Common Shares. The
Fund shall advise Apollo within 10 Business Days of the receipt of
notice of a new Financing from Apollo of its intention with respect to
participating in the relevant Financing, failing which it will be
deemed to have elected not to have participated in the relevant
Financing.

(l) NO NON-MONETARY CONSIDERATION - Apollo shall not, without the
prior written consent of the Fund not to be unreasonably
withheld, accept or solicit any non-monetary consideration in
respect of the sale, licensing or Distribution of any of the
Technology, the Product Rights or the Products.

(m) NOTIFICATION - Apollo shall promptly notify the Fund in writing
of any material adverse change in the business or affairs of
Apollo, any event or act or omission of Apollo which constitutes
an Event of Default, any transaction which will result in an

acquisition of control of Apollo, the commencement of any
litigation against it in an amount in excess of $50,000 or
relating to the Technology, the Product Rights or the Products or
other occurrence out of the ordinary course of business, and each
such notification shall contain full particulars of the event or
events described therein.

(n) INTEREST - Apollo shall pay interest on all overdue amounts at
the Prime Rate plus 2% from the date that payment should have
been made pursuant to this Agreement to the date that the payment
is actually made.

4.2 NON-WAIVER AND AUDIT

The acceptance by the Fund of any payment in respect of the Purchased Rights
shall be deemed not to be a waiver of any of its rights hereunder. The
Fund's authorized agents, employees and representatives shall have the right
to inspect and audit at all reasonable times during business hours, but in
any event not more than once each calendar year of the Term, the books,
records, documentation, sales reports, statements of profit and loss and Tax
Returns and other documents of Apollo relating to the Business, the
Technology, the Product Rights, the Products, the Direct Sales Revenue and
Fees and Income. The information contained in the documents, etc. which are
inspected shall be deemed to be Confidential Information hereunder. In the
event that any such audit shall disclose an understatement of such Direct
Sales Revenue, Fees and Income or Royalties as reported to the Fund by
Apollo, then Apollo shall pay the Fund within 15 days after receipt of notice
from the Fund an amount equal to the amount the Royalties have been underpaid
in any such year of the Term, together with interest thereon at the Prime
Rate plus 5% calculated from the date such amount should have been paid to
the date of actual payment. Further, in the event that the underpayment
shall be 5% or more for any calendar year, Apollo shall reimburse the Fund
for the cost of such inspection and/or audit.

ARTICLE 5
CONVERSION RIGHT

5.1 CONVERSION RIGHT

The Fund may at any time and from time to time up to 3 times during the Term
convert all or part of Apollo's future obligation to pay Royalties hereunder as
follows:

(a) Up to 50% of the Purchase Price in the aggregate may be converted
into Apollo Common Shares at a conversion rate per share equal to
the lower of: (i) US$ .875; and (ii) the price per share at which
Apollo Common Shares were issued pursuant to the Financing
immediately preceding the date on which the Fund exercises the
Conversion Right; and

(b) Up to 50% of the Purchase Price in the aggregate may be
converted into Apollo Common Shares at a conversion rate per
share equal to the lower of: (i) US$ 1.05; and (ii) the price per
share at which Apollo Common Shares were issued pursuant to the
Financing immediately preceding the date on which the Fund
exercises the Conversion Right.

5.2 TERMS AND CONDITIONS GOVERNING THE CONVERSION RIGHT

Any conversion of all or part of the Purchased Rights by the Fund into Apollo
Common Shares pursuant to the Conversion Right shall take place and be
completed on the terms and conditions set out in Schedule D.

5.3 PRO RATA REDUCTION OF ROYALTIES

Effective upon receipt of a certificate representing the relevant Apollo
Common Shares pursuant to any conversion of all or part of the future
Royalties by the Fund into Apollo Common Shares, but without any waiver by
the Fund of the payment of any Royalties accruing prior to the date thereof,
the percentage rates set out in items (i) and (ii) of the Purchased Rights
and the amounts set out in Sections 2.3 and 2.4 shall be reduced by the same
proportion that the portion of the Purchase Price converted bears to the
total Purchase Price so that, on an aggregate basis, if, for instance, half
of the Purchase Price has been converted pursuant to one or more conversions
by the Fund, the amount set out in item (i) of the Purchased Rights would be
equal to [*]%, the amount set out in (ii) of the Purchased Rights would be
equal to [*]% and the amounts set out in sections 2.3 and 2.4 would be equal
to:

* Confidential treatment has been requested for marked portion

[*]

5.4 PARAMOUNTCY

If the Fund gives written notice to Apollo of its intention to exercise the
Conversion Right in accordance with this Agreement and Schedule D after
receipt from Apollo of written notice under Section 2.4 but prior to receipt
by the Fund of any payment pursuant to Section 2.4, the Fund's Conversion
Right shall be paramount and shall govern.

ARTICLE 6
DEFAULT

6.1 EVENTS OF DEFAULT

Each of the following events shall constitute an event of default (an "EVENT
OF DEFAULT") under this Agreement:

(a) if Apollo fails to make any payment of Royalties when due and
does not remedy such failure within thirty (30) days after
receiving notice from the Fund specifying the failure and
requiring that it be remedied;

(b) if Apollo commits a breach of or fails to observe or perform any
other agreement, covenant or provision in this Agreement or in any
Closing Document and does not remedy such breach or failure within
thirty (30) days after receiving notice from the Fund specifying
the breach or failure and requiring that it be remedied (or, if
incapable of remedy within thirty (30) days, then such longer
period, not to exceed ninety (90) days, as may be reasonable to
remedy such breach or failure provided Apollo uses its best
efforts throughout such period to remedy the same) or if any
representation or warranty contained herein or in any Closing
Document shall prove to be false or incorrect in any material
respect;

* Confidential treatment has been requested for marked portion

(c) if Apollo does not pay its debts as they become due, admits in
writing its inability to pay its debts generally, makes an
assignment for the benefit of creditors or commits an act of
bankruptcy within the meaning of Applicable Law;

(d) any proceeding, voluntary or involuntary, is commenced respecting
Apollo pursuant to any statute relating to bankruptcy, insolvency,
reorganization of debts, liquidation, winding up or dissolution;

(e) any receiver, manager, receiver manager, trustee, sequestor,
custodian or liquidator or Person with similar powers is appointed
udicially or extra judicially for Apollo or for any of its property;

(f) Apollo defaults under any agreement with respect to any indebtedness
or other obligation to any Person exceeding [*], if such default has
resulted in, or may result, with notice or lapse of time or both, in,
the acceleration of any such indebtedness or obligation or the right
of such Person to realize upon any security; and

(g) Apollo passes any resolution for its liquidation, winding up or
dissolution.

6.2 REMEDIES

Upon the occurrence of any one or more Events of Default which are continuing
and not waived by the Fund in writing, then, in the case of an Event of Default
under subsections 6.1 (a) or (b), on the expiration of the notice period therein
specified; and in the case of an Event of Default under subsection 6.1(c) to
(g), inclusive, immediately upon such Event of Default occurring, or immediately
upon the occurrence of an acquisition of control of Apollo, the Fund may, in
addition to any other rights and remedies available hereunder at law or in
equity, terminate this Agreement or, in the case of an Event of Default under
Section 6.1(a) or (b) with respect to less than all of the Products, terminate
this Agreement with respect to the relevant Products only.

* Confidential treatment has been requested for marked portion

ARTICLE 7
INDEMNIFICATION

7.1 MUTUAL INDEMNIFICATIONS FOR BREACHES OF WARRANTY, ETC.

Apollo agrees with the Fund and the Fund agrees with Apollo (the Party
agreeing to indemnify another Party being called the "INDEMNIFYING PARTY" and
the Party to be indemnified being called the "INDEMNIFIED PARTY") to
indemnify and save harmless the Indemnified Party, effective as and from the
date hereof, from and against any claims, demands, actions, causes of action,
damage, loss, cost, liability or expense ("CLAIMS") which may be made or
brought against the Indemnified Party or which it may suffer or incur as a
result of, in respect of, or arising out of any non-fulfillment of any
covenant or agreement on the part of the Indemnifying Party under this
Agreement or any Closing Document or any incorrectness in or breach of any
representation or warranty of the Indemnifying Party contained herein or in
any Closing Document. Any amount which an Indemnifying Party is liable to
pay to an Indemnified Party pursuant to this Section shall bear interest at a
rate per annum equal to the Prime Rate, calculated and payable monthly, both
before and after judgment, with interest on overdue interest at the same
rate, from the date the Indemnified Party disbursed funds, suffered damages
or losses or incurred a loss, liability or expense in respect of a Claim, to
the date of payment by the Indemnifying Party to the Indemnified Party. Any
amount which an Indemnifying Party is required to pay to an Indemnified Party
pursuant to this Section or pursuant to Section 7.2 (including interest
thereon) is called an "Indemnified Loss". The foregoing obligation of
indemnification in respect of such Claims shall be subject to the limitation
set forth in Section 3.5 hereof respecting the survival of the
representations and warranties of the Parties.

7.2 THIRD PARTY CLAIMS

If a Claim is made against an Indemnified Party by a Third Party for which
the Indemnified Party may be entitled to indemnification under Section 7.1,
the Indemnified Party shall give notice (the "INDEMNITY NOTICE") to the
Indemnifying Party specifying the particulars of such claim within 30 days
after it receives notification of the Claim. Failure to give such notice
within such time period shall not prejudice the rights of an Indemnified
Party except to the extent that the failure to give such notice materially
adversely affects the ability of the Indemnifying Party to defend the Claim
or to cure the breach or incorrectness of the representation, warranty,
covenant or agreement giving rise to the Claim. The Indemnifying Party shall
have the right to participate in any negotiations or proceedings with respect
to such Claim at its own expense. The Indemnified Party shall not settle or
compromise any such Claim without the prior written consent of the
Indemnifying Party, unless

the Indemnifying Party has not, within 7 Business Days after the giving of
the Indemnity Notice, given notice to the Indemnified Party that it wishes to
dispute such Claim. If the Indemnifying Party does give such a notice, it
shall have the right at its own cost and expense to assume the defence of
such Claim and to defend such Claim in the name of the Indemnified Party.
The Indemnified Party shall provide to the Indemnifying Party all files,
books, records and other information in its possession or control which may
be relevant to the defence of such Claim. The Indemnified Party shall
co-operate in all reasonable respects in the defence of such Claim but at the
expense of the Indemnifying Party. If the Indemnifying Party fails, after
the giving of such notice, diligently and reasonably to defend such Claim
throughout the period that such Claim exists, its right to defend the Claim
shall terminate and the Indemnified Party may assume the defence of such
Claim at the sole expense of the Indemnifying Party. In such event, the
Indemnified Party may compromise or settle such Claim, without the consent of
the Indemnifying Party.

ARTICLE 8
CONFIDENTIALITY

8.1 CONFIDENTIAL INFORMATION

Confidential Information and all copies thereof made by the receiving party
including translations, compilations and partial copies shall remain the
property of the disclosing party and shall be returned to the disclosing party
upon request or termination of this Agreement, provided that each Party shall be
entitled to keep one (1) copy of such information with its legal counsel, for
the purposes of determining its rights and obligations hereunder. The receiving
party shall use the Confidential Information solely for the purposes described
in this Agreement.

8.2 NON-DISCLOSURE.

The receiving party shall hold in confidence, during and after the termination
or expiration of this Agreement, and not disclose, provide, or otherwise make
available, in whole or in part the Confidential Information to any Third Party
without the prior written consent of the disclosing party. The receiving party
shall ensure that only its employees and agents with a need to know the
Confidential Information shall have access to it. The receiving party shall
exercise a standard of care under this Section that is not less than the
standard of care it exercises under its own corporate policy for confidentiality
and use restrictions for its own Confidential Information. If and when the
receiving party is required at any time to disclose Confidential Information by
Applicable Law or by any Governmental Agency having

jurisdiction, the receiving party must notify the disclosing party and use
reasonable efforts to have the Governmental Agency retain the Confidential
Information in confidence. Upon making such reasonable efforts, the
receiving party shall not be in breach of this Section.

ARTICLE 9
DELIVERIES ON EXECUTION

9.1 DELIVERIES UPON EXECUTION OF THIS AGREEMENT.

Upon execution of this Agreement:

(a) Apollo shall deliver to the Fund and the Fund shall deliver to Apollo
proof satisfactory to the Party receiving the same, acting reasonably,
that each of them has taken all necessary corporate and other steps
necessary to authorize and effect the completion of the matters herein
contemplated;

(b) the Fund shall pay the Purchase Price to Apollo by certified cheque,
bank draft or in such other manner as Apollo may reasonably direct in
writing;

(c) Apollo shall issue and deliver to the Fund certificates in favour of
the Fund representing the $.70 Warrants and the $.875 Warrants duly
executed under seal;

(d) the Fund and Apollo shall enter into a Subscription Agreement in the
form attached hereto as Schedule E, the Fund shall pay the
subscription price to Apollo by certified cheque, bank draft or in
such other manner as Apollo may reasonably direct in writing and
Apollo shall issue and deliver to the Fund a share certificate
representing the Apollo Common Shares purchased pursuant to the
Subscription Agreement registered in the name of the Fund or as the
Fund may in writing direct;

(e) the Fund and Apollo shall enter into a Registration Rights Agreement
in the form attached hereto as Schedule F;

(f) Evidence that Xxxxxxx Xxxxxxxxx has been duly and effectively
appointed as a director of Apollo satisfactory to the Fund shall be
delivered by Apollo; and

(g) the Fund shall receive an opinion from Messrs. Xxxxxx & Dodge LLP
dated the date hereof in form and substance satisfactory to the Fund
and its counsel, acting reasonably.

ARTICLE 10
GENERAL

10.1 HEADINGS

The division of this Agreement into Articles, Sections, Subsections, Exhibits
and Schedules and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this
Agreement. The Article, Section, Subsection, Exhibit and Schedule headings in
this Agreement are not intended to be full or precise descriptions of the
text to which they refer and are not to be considered part of this Agreement.

10.2 NUMBER AND GENDER

In this Agreement, words in the singular include the plural and vice-versa
and words in one gender include all genders.

10.3 ENTIRE AGREEMENT

This Agreement, together with the Closing Documents, constitutes the entire
agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, negotiations, discussions and
understandings, written or oral. There are no representations, warranties,
conditions, other agreements or acknowledgements, whether direct or
collateral, or express or implied, that form part of or affect this
Agreement, or which induced any Party to enter into this Agreement or on
which reliance is placed by any Party, except as specifically set forth in
this Agreement or in the Closing Documents.

10.4 AMENDMENT

This Agreement may be amended or supplemented only by a written agreement signed
by each Party.

10.5 WAIVER OF RIGHTS

Any waiver of, or consent to depart from, the requirements of any provision
of this Agreement shall be effective only if it is in writing and signed by
the Party giving it, and only in the specific instance and for the specific
purpose for which it has been given. No failure on the part of any Party to
exercise,

and no delay in exercising, any right under this Agreement shall operate as a
waiver of such right. No single or partial exercise of any such right shall
preclude any other or further exercise of such right or the exercise of any
other right.

10.6 APPLICABLE LAW

This Agreement shall be governed by, and interpreted and enforced in
accordance with, the laws in force in the Commonwealth of Massachusetts. The
Parties irrevocably submit to the non-exclusive jurisdiction of the courts of
Commonwealth of Massachusetts with respect to any matter arising hereunder or
related hereto.

10.7 CURRENCY

Unless specified otherwise, all statements of or references to monetary
amounts in this Agreement are to United States Dollars.

10.8 TENDER

Any tender of documents or money hereunder may be made upon the Parties or
their respective counsel and money shall be tendered by certified cheque or
bank draft.

10.9 PERFORMANCE ON HOLIDAYS

If any action is required to be taken pursuant to this Agreement on or by a
specified date which is not a Business Day, then such action shall be valid
if taken on or by the next succeeding Business Day.

10.10 FINANCIAL REPORTING STANDARDS

All accounting and financial terms used herein and the treatment of any
accounting matter contemplated herein, unless specifically provided to the
contrary, shall be interpreted and applied in accordance with GAAP.

10.11 EXPENSES

Except that Apollo shall reimburse the Fund an amount up to US$ 15,000 in
respect of the legal fees which it incurs in preparing this Agreement and
completing the transaction contemplated therein, each Party shall pay all
expenses it incurs in authorizing, preparing, executing and performing this
Agreement and the transactions contemplated hereunder, whether or not the
Closing occurs, including all fees and expenses of its legal counsel, bankers,

investment bankers, brokers, accountants or other representatives or
consultants.

10.12 TIME

Time is of the essence of this Agreement and each of its provisions.

10.13 NOTICES

Any notice, demand or other communication (in this Section, a "NOTICE")
required or permitted to be given or made hereunder shall be in writing and
shall be sufficiently given or made if:

(a) delivered in person during normal business hours of the recipient on a
Business Day and left with a receptionist or other responsible
employee of the recipient at the relevant address set forth below;

(b) except during any period of actual or imminent interruption of postal
services due to strike, lockout or other cause, sent by registered
mail; or

in the case of a notice to Apollo at:

0 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxxxxxx
00000

Attention: President and CEO

Fax No.: (000) 000-0000

with a copy to Xxxxxx & Dodge LLP at:

Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx
00000-0000

Attention: Xxxxxxx Xxxxxx

Fax No.: (000) 000-0000

and in the case of a notice to the Fund to its general partner at:

Neuroscience Partners Limited Partnership
c/o MDS Associ[caad 177]es-Neuroscience Inc.
000 Xxxxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0

Attention: Senior Vice-President

Fax No.: (000) 000-0000

with a copy to Fasken Xxxxxxxx Xxxxxxx at:

Xxxxx 0000
Xxxxxxx Xxxxxxxx Bank Tower
Toronto Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0

Attention: Xxxxx X. Xxxxxxx

Fax No. (000) 000-0000

Any notice so given shall be deemed to have been given and to have been
received on the day of delivery, if so delivered, on the fifth Business Day
(excluding each day during which there exists any interruption of postal
services due to strike, lockout or other cause) following the mailing
thereof, if so mailed, and on the day following the day notice was sent by
Transmission, provided such day is a Business Day and if not, on the first
Business Day thereafter. Addresses for notice may be changed by giving
notice in accordance with this Section.

10.14 ASSIGNMENT

This Agreement and any or all of the rights and obligations hereunder may be
assigned by the Fund upon written notice to Apollo. Neither this Agreement,
any rights or obligations hereunder the Technology shall be assignable by
Apollo without the prior written consent of the Fund not to be unreasonably
withheld. Subject thereto, this Agreement shall enure to the benefit of and
be binding upon the Parties and their respective successors (including any
successor by reason of amalgamation or statutory arrangement of any Party)
and permitted assigns.

10.15 FURTHER ASSURANCES

Each Party shall do such acts and shall execute such further documents,
conveyances, deeds, assignments, transfers and the like, and will cause the
doing of such acts and will cause the execution of such further documents as
are within its power as any other Party may in writing at any time and from
time to time reasonably request be done and/or executed, in order to give
full effect to the provisions of this Agreement and the Closing Documents.

10.16 INDEPENDENT PARTIES

Nothing contained in this Agreement shall in any way or for any purpose
constitute any Party a partner or agent or legal representative of any other
Party in the conduct of any business or otherwise or a member of a joint
venture or joint enterprise or create any fiduciary relationship among them.
No Party shall have any authority to act for or to assume any obligation or
responsibility on behalf of any other and no Party shall have any authority
to bind any other Party to act or to undertake any obligation or
responsibility whatsoever. Apollo agrees that it will only have recourse
against the assets of the Fund and it shall not have any recourse against the
limited partners of the Fund under any circumstances.

10.17 PUBLIC ANNOUNCEMENTS

The Parties agree to discuss and coordinate all public announcements
concerning the transactions contemplated herein except as may be necessary,
in the opinion of counsel to the Party making such disclosure, to comply with
the requirements of any Applicable Law. If any such public statement or
release is so required, the Party making such disclosure shall consult with
the other Party prior to making such statement or release, and the Parties
shall use reasonable efforts, acting in good faith, to agree upon a text for
such statement or release which is satisfactory to all Parties.

10.18 SEVERABILITY

If any covenant, obligation or provision of this Agreement or the application
thereof to any Person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement or the application of such
covenant, obligation or agreement to Persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby and each covenant, obligation and provision of this Agreement shall
be separately valid and enforceable to the fullest extent permitted by law.

10.19 COUNTERPARTS

This Agreement may be executed in any number of counterparts and by facsimile
transmission. Each executed counterpart shall be deemed to be an original.
All executed counterparts taken together shall constitute one agreement.

10.20 FACSIMILE EXECUTION

To evidence the fact that it has executed this Agreement, a Party may send a
copy of its executed counterpart to the other Party by facsimile
transmission. That Party shall be deemed to have executed this Agreement on
the date it sent such facsimile transmission. In such event, such Party
shall forthwith deliver to the other Party the counterpart of this Agreement
executed by such Party.

TO WITNESS THEIR AGREEMENT, the Parties have duly executed this Agreement on
the date first set forth above.

NEUROSCIENCE PARTNERS LIMITED
PARTNERSHIP by its General Partner
MDS ASSOCIES-NEUROSCIENCE INC.

Per: /s/ Xxxxxxx X. Xxxxxxxxx, Vice President
----------------------------------------
Xxxxxxx X. Xxxxxxxxx, Vice President

Per: /s/ Xxxxx Xxxxxxxxxx, Vice-President
----------------------------------------
Xxxxx Xxxxxxxxxx, Vice-President

APOLLO GENETICS, INC.

Per: _________________________________________

SCHEDULE A

WARRANT TO PURCHASE COMMON STOCK
OF APOLLO GENETICS, INC.

See Exhibit 3.4 to this Registration Statement

SCHEDULE B

PATENT RIGHTS

[*]

_________________
[*]

* Confidential treatment has been requested for marked portion

- 2 -

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ENDOCON, INC.'S PATENTS RELEVANT TO NEURESTROLs ALL ASSIGNED TO
ENDOCON, INC. BY THE INVENTOR, XXX XXXXXXX, AND NOW OWNED BY ENDOCON, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

[*]

* Confidential treatment has been requested for marked portion

SCHEDULE C

INSTRUMENTS, CONTRACTS, LEASES, LICENCES,
RIGHTS OR OTHER AGREEMENTS RELATING TO THE
TECHNOLOGY, THE PRODUCT RIGHTS, THE PRODUCTS
OR THE PURCHASED RIGHTS

1. The Athena Agreement.

2. The Endocon Agreement.

3. Patent License Agreement with Research Component made the 15th day of
December, 1993 and revised and restated on the 15th day of October, 1996
between the University of Florida Research Foundation, Inc. and Apollo.

4. Corporate Research Agreement to Accompany License Agreement entered into the
15th day of December, 1993 between Apollo and the University of Florida and
Participation Agreements of various dates made pursuant thereto and executed
by Xxxxx X. Xxxxxxxx, Xxxxxxxx Xxxxx, Xxxx Xxxxxx and each participant in
the Sponsored Activity (as defined therein).

SCHEDULE D

TERMS AND CONDITIONS GOVERNING THE CONVERSION RIGHT

(a) EXERCISE The Conversion Right may be exercised by the Fund at any time in
whole or from time to time in part, in accordance with and subject to the
provisions hereof up to 5:00 p.m. (Massachusetts time) on the final day of
the Term (the "Time of Expiry"). If the Conversion Right has not been
exercised by the Time of Expiry, all rights thereunder shall wholly cease
and terminate and shall be void and of no value or effect. The Conversion
Right may be exercised by surrendering to Apollo at its address for notice,
at any time after the date hereof up to the Time of Expiry, a Subscription
Form, substantially in the form attached hereto as Schedule 1, duly
completed and executed.

(b) PARTIAL EXERCISE The Fund may subscribe for and have issued to it a number
of Apollo Common Shares less than the total number it is entitled to
pursuant to the Conversion Right provided that it subscribes for a minimum
of US$ 150,000 of Apollo Common Shares each time. Partial exercises of the
Conversion Right shall be recorded by the Fund on the grid attached to the
Subscription Form as Appendix 1. the grid shall be initialed by the
Parties and form part of the Subscription Form. The grid, as so initialed,
shall, in the absence of manifest error, constitute conclusive proof of the
dates, amounts, numbers, information and factors set out therein.

(c) SHARE CERTIFICATES Within ten (10) Business Days after the delivery of a
duly completed and executed Subscription Form by the Fund (the "Exercise
Date"), Apollo shall issue and deliver to the Fund's address for notice,
registered in such name or names as the Fund may direct or if no such
direction has been given, in the name of the Fund, a certificate or
certificates representing the number of Apollo Common Shares issuable under
the Conversion Right as a result of the delivery of the Subscription Form.
Such exercise shall be deemed to have been effected as of the close of
business on the Exercise Date and at such time the rights of the Fund with
respect to the portion of the Conversion Right which has been exercised as
such shall cease, and the person or persons in whose name or names any
certificate or certificates for Apollo Common Shares shall then be issuable
upon such exercise or deemed exercise shall be deemed to have become the
holder or holders of record of the Apollo Common Shares represented
thereby.

(d) CONVERSION RATE Subject to the aggregate limits set out in Article 5, the
Fund may convert any portion of the Purchase Price from time to time. The
Fund shall not be bound to first convert all of the portion of the

-2-

Purchase Price at the conversion rate set out in Section 5.1(a)
before it shall be entitled to convert any of the portion at the
conversion rate set out in Section 5.1(b), and vice versa.

(e) FRACTIONAL SHARES No fractional shares shall be issued upon any whole or
partial exercise of the Conversion Right.

(f) CORPORATE CHANGES If Apollo shall be a party to any reorganization,
merger, amalgamation, dissolution, sale of all or substantially all of its
assets, change or reclassification of its outstanding shares (an "Event"),
whether or not Apollo is the surviving entity, the Conversion Right shall
apply to the securities to which a holder of Apollo Common Shares
immediately prior to the Event would have been entitled by reason of such
Event. If the number of securities outstanding following an Event is
greater than the number of Apollo Common Shares immediately prior to the
Event, then the conversion rates per share expressed in United States
dollars in Sections 5.1(a)(i) and (b)(i) of the Agreement in effect
immediately prior to such Event shall be reduced by the reciprocal of the
multiple required to be used to arrive at the new number of securities. If
the number of securities outstanding following an Event is less than the
number of Apollo Common Shares immediately prior to the Event, then the
conversion rate per share expressed in United States dollars in Sections
5.1(a)(i) and (b)(i) of the Agreement in effect immediately prior to such
Event shall be increased by the reciprocal of the fraction required to be
used to arrive at the new number of securities.

(g) SUBDIVISION OR CONSOLIDATION OF SHARES In the event Apollo shall subdivide
its outstanding Apollo Common Shares into a greater number of Apollo Common
Shares, the conversion rate per share expressed in United States Dollars in
Sections 5.1(a)(i) and (b)(i) of the Agreement in effect immediately prior
to such subdivision shall be reduced by the reciprocal of the multiple used
to arrive at the new number of Apollo Common Shares. Conversely, in the
event Apollo shall consolidate its outstanding Apollo Common Shares into a
lesser number of Apollo Common Shares, the conversion rate per share
expressed in United States dollars in Sections 5.1(a)(i) and (b)(i) of the
Agreement in effect immediately prior to such consolidation shall be
increased by the reciprocal of the fraction used to arrive at the new
number of Apollo Common Shares.

(h) STOCK DIVIDENDS OR DISTRIBUTIONS In the event Apollo: (i) issues Apollo
Common Shares or securities exchangeable for or convertible into Common
Shares to all or substantial of the holders of the Apollo Common Shares as
a stock dividend; or (ii) makes a distribution on its outstanding Apollo
Common Shares payable in Apollo Common

-3-

Shares or securities exchangeable for or convertible into Apollo Common
Shares, the conversion rate per share expressed in United States dollars
in Sections 5.1(a)(i) and (b)(i) of the Agreement in effect immediately
prior to such stock dividend or distribution shall be reduced by the
reciprocal of the multiple used to arrive at the new number of Apollo
Common Shares (on a fully diluted basis).

(i) OTHER DISTRIBUTIONS In the event Apollo makes a distribution (a
"Distribution") on its outstanding Apollo Common Shares payable in (i) the
shares of Apollo of any class other than Apollo Common Shares; (ii) rights,
options or warrants to acquire shares or securities exchangeable for or
convertible into shares or property or other assets of Apollo; (iii)
evidence of indebtedness; or (iv) any property or other assets of Apollo,
the conversion rate expressed in United States dollars in Sections
5.1(a)(i) and (b)(i) of the Agreement in effect immediately prior to such
Distribution shall be reduced by a fraction that is equal to the ratio of
the aggregate fair market value of Apollo immediately following the
Distribution to the fair market value immediately prior to the
Distribution;

(j) NOTICE OF ADJUSTMENT Upon any adjustment of the conversion rate expressed
in United States dollars in Section 5.1(a)(i) and (b)(i) of the Agreement
then and in each case Apollo shall give written notice thereof to the Fund,
which notice shall state the conversion rates resulting from such
adjustment, and shall upon receipt of the written request of the Fund set
forth in reasonable detail the method of calculation and the facts upon
which such calculation in based.

(k) ADJUSTMENTS CUMULATIVE The adjustments provided for herein are cumulative
and will: (i) be computed to the nearest one-tenth of one cent; and (ii) be
made successively whenever an event referred to herein occurs.

(l) FINANCINGS In the event Apollo completes a Financing as a result of which
Apollo issues securities convertible into or exchangeable for Apollo Common
Shares, the price per share at which Apollo Common Shares were issued shall
be, for the purposes of Sections 5.1(a)(ii) and (b)(ii) of the Agreement,
the lowest of: (i) the imputed price per share on a fully diluted basis;
(ii) the unit price less an amount equal to the price per option or warrant
of any options or warrants which, together with Apollo Common Shares, form
part of the Unit determined by applying the Black Scholes pricing model;
and (iii) the lowest exercise price or conversion or exchange rate at which
any securities issued by Apollo pursuant to the relevant Financing may be
convertible into or exchangeable for Apollo Common Shares.

SCHEDULE 1
Subscription Form

TO: APOLLO GENETICS, INC. (the "Company")

RE: Exercise of Conversion Right pursuant to a Royalty Purchase Agreement dated
December 18, 1996 between Neuroscience Partners Limited Partnership and the
Company (the "Agreement").

The undersigned hereby irrevocably elects to exercise its Conversion Right with
respect to U.S.$_____________________ of the // $.875 // $1.05 [CHECK ONE]
Purchase Price portion and hereby subscribes for ______________ Apollo Common
Shares (or other property or securities contemplated by the Conversion Right).

DATED this day of , .

NEUROSCIENCE PARTNERS LIMITED PARTNERSHIP
BY ITS GENERAL PARTNER,
MDS ASSOCIES-NEUROSCIENCE INC.

By:______________________________________
Name:
Title:

Effective upon receipt of a certificate or certificates representing the
number of Apollo Common Shares set out herein in accordance with the
registration and delivery instructions set out below (the "Effective Date"),
the undersigned hereby automatically waives its right to receive the portion
of the future Royalties which accrue from and after the Effective Date set
out in the column titled "Portion of Royalties Waived", and acknowledges and
agrees that the rates set out in items (i) and (ii) of the Purchased Rights
shall, from the Effective Date, be the rates set out in the columns "Future
Direct Sales Royalty Rate" and "Future Fees and Income Royalty Rate",
respectively. The undersigned further acknowledges and agrees that the
amounts set out in Section 2.3 of the Agreement shall, from the Effective
Date, be equal to the amount actually set out in the Agreement multiplied by
the percentage set out in the column, "Termination Buy-out Amount Factor".

Defined terms not otherwise defined herein shall have the meaning assigned
thereto in the Agreement.

DIRECTION AS TO REGISTRATION (if different from the Fund at its address for
notice in the Agreement)

Name of Registered Holder: ______________________________________

Address of Registered Holder: ______________________________________

______________________________________

DIRECTIONS AS TO DELIVERY (if different from the Fund at its address for notice
in the Agreement)

Address of Delivery ______________________________________

______________________________________

Attention: __________________________

APPENDIX 1

GRID

CUMULATIVE RECORD OF CONVERSIONS UNDER THE CONVERSION RIGHT

____________________________________________________________________________________________________________________________
DATE OF PORTION OF BALANCE OF PORTION OF BALANCE OF BASIS OF NO. OF PORTION OF FUTURE FUTURE TERMINATION/
EXERCISE $.875 $.875 $1.05 $1.05 CONVER- APOLLO ROYALTIES DIRECT FEES AND BUY-OUT
OF CON- PURCHASE PURCHASE PURCHASE PURCHASE SION COMMON WAIVED(1) SALES INCOME AMOUNT
VERSION PRICE PRICE TO BE PRICE PRICE TO BE SHARES TO ROYALTY ROYALTY FACTOR(4)
RIGHT CONVERTED CONVERTED CONVERSION CONVERTED BE ISSUED RATE(2) RATE(3)
____________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________

_____________________

1 The Portion of Royalties waived is equal to the cumulative percent of the
total Purchase Price which has been converted.

2 Future Direct Sales Royalty Rate is equal to the Portion of Royalties
Waived multiplied by 2%.

3 Future Fees and Income Royalty Rate is equal to the Portion of Royalties
Waived multiplied by 5%.

4 The revised amounts set out in Sections 2.3 and 2.4 for each year are equal
to the amount actually set out in the Agreement multiplied by the
percentage set out in this column.

SCHEDULE E

SUBSCRIPTION AGREEMENT

TO: APOLLO GENETICS, INC. (the "Corporation")

Neuroscience Partners Limited Partnership (the "Subscriber") hereby subscribes
for and offers to purchase, subject to the terms and conditions set out herein,
714,290 shares of common stock, US$.02 par value per share (each, a "Common
Share", collectively, the "Purchased Shares").

The Purchased Shares are being purchased pursuant to a Royalty Purchase
Agreement between the Subscriber and the Corporation dated the date hereof (the
"Purchase Agreement"). In the event of any conflict or inconsistency between
the provisions of this Agreement and the provisions of the Purchase Agreement,
the Purchase Agreement shall govern.

1. SUBSCRIPTION PRICE

The aggregate subscription price (the "Subscription Price") for the Purchased
Shares is US$500,000 or approximately US$.7 per Common Share.

2. CLOSING

The delivery of and payment for the Purchased Shares will be completed (the
"Closing") on December 17, 1996, or at such other time or on such other date as
the Corporation and the Subscriber may agree (such time and date being herein
referred to respectively as the "Time of Closing" and the "Closing Date").

The Subscriber hereby agrees to deliver to the Corporation at the Closing the
following documents:

(i) a certified cheque, bank draft or wire transfer made payable to
"Apollo Genetics, Inc." or such other person as the Corporation may
direct representing the Subscription Price;

(ii) an executed copy of this subscription agreement; and

(iii) such other documents and instruments as the Corporation may
reasonably require to give effect to and carry out the transactions
contemplated herein.

- 2 -

The Corporation hereby agrees to deliver to the Subscriber at the Closing the
following documents:

(i) a single certificate representing the Purchased Shares registered in
accordance with the registration instructions set out in section 10;

(ii) an executed copy of this subscription agreement;

(iii) an opinion of its counsel in a form reasonably satisfactory to the
Subscriber; and

(iv) such other documents and instruments as the Corporation may
reasonably require to give effect to and carry out the transactions
contemplated herein.

3. REPRESENTATIONS, WARRANTIES, ETC. OF THE SUBSCRIBER

The Subscriber hereby represents and warrants to the Corporation (which
representations and warranties shall survive closing and continue in full force
and effect for a period of three years from the date hereof) and acknowledges
that the representations of the Subscriber made in Section 3.2 of the Purchase
Agreement are true and correct as if made pursuant hereto. The Subscriber
acknowledges that the Corporation is relying on those representations and
warranties in entering into this Subscription Agreement:

4. REPRESENTATIONS, WARRANTIES, ETC. OF THE CORPORATION

By its acceptance of this subscription agreement, the Corporation represents and
warrants to the Subscriber (which representations and warranties shall survive
closing and continue in full force and effect for a period of three years from
the date hereof) and acknowledges that the representations of the Corporation
made in Section 3.1 of the Purchase Agreement are true and correct as if made
pursuant hereto. The Corporation acknowledges that the Subscriber is relying on
those representations and warranties in entering into this subscription
agreement:

5. GOVERNING LAW

This subscription agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts. The Corporation and the
Subscriber hereby irrevocably attorn to the non-exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts with respect to any matters arising
out of this subscription agreement.

6. ASSIGNMENT

This subscription agreement is not transferable or assignable by the parties
hereto.

- 3 -

7. ENTIRE AGREEMENT

This subscription agreement contains the entire agreement of the parties hereto
relating to the subject matter hereof and there are no representations,
covenants or other agreements relating to the subject matter hereof except as
stated or referred to herein.

8. TIME OF ESSENCE

Time shall be of the essence of this subscription agreement.

9. HEADINGS

The headings contained herein are for convenience only and shall not affect the
meaning or interpretation of this subscription agreement.

10. DETAILS OF REGISTRATION AND DELIVERY

A. Name of Subscriber: Neuroscience Partners Limited Partnership
Street Address: 000 Xxxxxxxxxxxxx Xxxx.
Xxxx xxx Xxxxxxxx: Xxxxxxxxx, Xxxxxxx
Postal Code: X0X 0X0
Contact: Xxxxxxx Xxxxxxxxx
Phone No.: 000-000-0000
Fax No.: 000-000-0000

B. Registration of the certificate representing the Common Shares, each of the
Warrants and the Common Shares issuable on exercise of the Warrants should
be made as follows:

Name: Neuroscience Partners Limited Partnership
Registration Address: 000 Xxxxxxxxxxxxx Xxxxxxxxx
Xxxx xxx Xxxxxxxx: Xxxxxxxxx, Xxxxxxx
Postal Code: X0X 0X0

- 4 -

11. SIGNATURE OF SUBSCRIBER

DATED as of the 18th day of December, 1996.

NEUROSCIENCE PARTNERS LIMITED PARTNERSHIP
by its General Partner
MDS ASSOCIES-NEUROSCIENCE INC.

Per: /s/ Xxxxxxx X. Xxxxxxxxx, Vice-President
-----------------------------------------
Xxxxxxx X. Xxxxxxxxx, Vice-President

Per: /s/ Xxxxx Xxxxxxxxxx, Vice-President
----------------------------------------
Xxxxx Xxxxxxxxxx, Vice-President

12. CONFIRMATION AND ACCEPTANCE

This subscription agreement is confirmed and accepted by the Corporation.

DATED as of the 18th day of December, 1996.

APOLLO GENETICS, INC.

Per:
-----------------------------------------

SCHEDULE F
REGISTRATION RIGHTS AGREEMENT

See Exhibit 3.3 to this Registration Statement

Schedule G

FINANCIAL STATEMENTS

APOLLO GENETICS, INC.
(a development stage company)

FINANCIAL STATEMENTS

DECEMBER 31, 1995

APOLLO GENETICS, INC.
(a development stage company)

- I N D E X -
-------------

PAGE
NUMBER
------

REPORT OF INDEPENDENT AUDITORS 1

BALANCE SHEETS 2

STATEMENTS OF OPERATIONS 3

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 4

STATEMENTS OF CASH FLOWS 5

NOTES TO FINANCIAL STATEMENTS 6

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Apollo Genetics, Inc.
Cambridge, Massachusetts

We have audited the accompanying balance sheet of Apollo Genetics, Inc.
(a development stage company) as at December 31, 1995, and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the years in the two-year period then ended, and for the period from
July 9, 1992 (inception) through December 31, 1995. These financial
statements are the responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of Apollo Genetics,
Inc. at December 31 1995, and the results of its operations and its cash
flows for the each of the years in the two-year period then ended, and for
the period from July 9, 1992 (inception) through December 31, 1995 in
conformity with generally accepted accounting principles.

The accompanying condensed balance sheet of Apollo Genetics, Inc. as at
September 30, 1996 and the related condensed statements of operations and cash
flows for the nine-month periods ended September 30, 1996 and 1995 and the
period from July 9, 1992 (inception) through September 30, 1996 were not
audited by us and, accordingly, we do not express an opinion on them.

/s/ Xxxxxxx X. Xxxxxx & Company, LLP

Cambridge, Massachusetts
July 15, 1996

With respect to Notes A and E
November 6, 1996

APOLLO GENETICS, INC.
(a development stage company)

BALANCE SHEETS

December 31, September 30,
A S S E T S 1995 1996
----------- ------------ -------------
(Unaudited)
Current assets:
Cash and cash equivalents . . . . . . . . . $ 246,721 $ 373,645
Stock subscriptions receivable (Note C) . . 112,500
------------ -------------

Total current assets . . . . . . . . 246,721 486,145

Organization costs, net of accumulated
amortization of $3,584 at December 31,
1995 and $4,371 at September 30, 1996
(Note B). . . . . . . . . . . . . . . . . . 1,661 874
Deferred public offering costs . . . . . . . . 5,000
------------ -------------

T O T A L. . . . . . . . . . . . . . $ 248,382 $ 492,019
------------ -------------
------------ -------------

LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
-----------------------------

Current liabilities:
Accounts payable and accrued expenses . . . $ 161,923 $ 102,981
Notes payable (Note D). . . . . . . . . . . 73,425
------------ -------------

Total current liabilities. . . . . . 161,923 176,406
------------ -------------

Notes payable (Note D) . . . . . . . . . . . . 204,400
------------

Commitments (Note F)

Stockholders' equity (deficit) (Note E):
Preferred stock - $.01 par value;
4,000,000 shares authorized, none
issued

Common stock - $.02 par value; 20,000,000
shares authorized, 11,770,000 shares
issued at December 31, 1995 and
13,017,843 shares issued at
September 30, 1996. . . . . . . . . . . . 235,400 260,357
Additional paid-in capital. . . . . . . . . 994,120 1,625,629
Deficit accumulated during the
development stage . . . . . . . . . . . . (1,347,461) (1,570,373)
------------ -------------

Total stockholders' equity
(deficit) . . . . . . . . . . . . . (117,941) 315,613
------------ -------------

T O T A L. . . . . . . . . . . . . . $ 248,382 $ 492,019
------------ -------------
------------ -------------

Attention is directed to the foregoing auditor's report and to the
accompanying notes to financial statements.

- 2 -

APOLLO GENETICS, INC.
(a development stage company)

STATEMENTS OF OPERATIONS

July 9, 1992 July 9, 1992
Year Ended (Inception) Nine Months Ended (Inception)
December 31, Through September 30, Through
---------------------- December 31, --------------------- September 30,
1995 1994 1995 1996 1995 1996
---------- ---------- ------------- ---------- ---------- -------------
(Unaudited) (Unaudited)

Revenue:
Licensing and option revenue
(Note B(2)) . . . . . . . . . . . . $ 170,000 $ 170,000

Interest income . . . . . . . . . . . $ 2,535 $ 3,954 $ 12,071 7,301 19,372
---------- ---------- ------------- ---------- -------------
$ 2,535 $ 3,954 $ 12,071 177,301 189,372
---------- ---------- ------------- ---------- -------- -------------

Expenses:
Research and development. . . . . . . 131,842 199,654 466,838 100,716 $ 94,966 567,554
General and administrative. . . . . . 230,592 323,613 857,909 268,819 187,462 1,126,728
Amortization expense. . . . . . . . . 1,049 1,049 3,584 787 787 4,371
Interest expense. . . . . . . . . . . 31,201 2,645 31,201 29,891 22,691 61,092
---------- ---------- ------------- ---------- ---------- -------------
Total expenses . . . . . . . . 394,684 526,961 1,359,532 400,213 305,906 1,759,745
---------- ---------- ------------- ---------- ---------- -------------

NET LOSS . . . . . . . . . . . . . . . . $(392,149) $(523,007) $ (1,347,461) $(222,912) $(305,906) $(1,570,373)
---------- ---------- ------------- ---------- ---------- -------------
---------- ---------- ------------- ---------- ---------- -------------

Attention is directed to the foregoing auditors' report and to the accompanying notes to financial statements.

- 3 -

APOLLO GENETICS, INC.
(a development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Common Stock
$ .92 Per Value Additional
------------------------ Paid-in
Shares Amount Capital
-------- -------- ----------

Issuance of common stock at $.02 per share from inception
through December 31, 1992. . . . . . . . . . . . . . . . . . . . 2,050,000 $ 41,000
Issuance of common stock for services at $.02 per share
from inception through December 31, 1992 . . . . . . . . . . . . 200,000 4,000
Net loss for the year ended December 31, 1992. . . . . . . . . . .
--------- --------
Balance - December 31, 1992 . . . . . . . . . . . . . . . . . . . 2,250,000 45,000
Additional shares sold at $ .02 per share . . . . . . . . . . . . 4,000,000 80,000
Shares issued for services at $ .02 per share. . . . . . . . . . . 540,000 10,800
State of common stock in connection with private placement
of stock at $ .20 per share . . . . . . . . . . . . . . . . . . 3,200,000 64,000 $ 576,000
Costs related to private placement . . . . . . . . . . . . . . . . (36,530)
Shares issued for services at $ .20 per share . . . . . . . . . . 30,000 600 5,400
Net loss for the year ended December 31, 1993. . . . . . . . . . .
--------- -------- ----------
Balance - December 31, 1993 . . . . . . . . . . . . . . . . . . . 10,020,000 200,400 544,870
Repurchase of common stock by the Company and cancellation
of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,300) (1,000)
Common stock warrants issued in connection with notes payable . . 6,750
Net loss for the year ended December 31, 1994 . . . . . . . . . .
---------- -------- ----------
Balance - December 31, 1994 . . . . . . . . . . . . . . . . . . . 9,970,000 199,400 551,620
Sale of common stock at $ .25 per share. . . . . . . . . . . . . . 1,800,000 36,000 414,000
Costs of raising capital . . . . . . . . . . . . . . . . . . . . (12,250)
Purchase (for $8,000) and resale (for $20,000) of 200,000
shares of common stock . . . . . . . . . . . . . . . . . . . . . 12,000
Capital contributed by stockholder . . . . . . . . . . . . . . . . 25,000
Common stock warrants issued in connection with notes payable. . . 3,750
Net loss for the year ended December 31, 1995. . . . . . . . . . .
---------- -------- ----------
Balance - December 31, 1995. . . . . . . . . . . . . . . . . . . . 11,770,000 235,400 994,120
Shares issued for services at $ .30 per share. . . . . . . . . . . 83,552 1,471 23,395
Conversion of debt into common stock . . . . . . . . . . . . . . . 450,003 9,000 122,400
Sale of common stock in connection with private placement
of stock at $ .70 per share . . . . . . . . . . . . . . . . . . 714,291 14,286 485,714
Net loss for the nine months ended September 30, 1994. . . . . . .
---------- -------- ----------
BALANCE - SEPTEMBER 30, 1996 (unaudited) . . . . . . . . . . . . . 13,017,843 $ 260,357 $ 1,625,629
---------- --------- -----------
---------- --------- -----------

Deficit
Accumlated
During
Developememt
Stage Total
------------ ---------

Issuance of common stock at $.02 per share from inception
through December 31, 1992. . . . . . . . . . . . . . . . . . . . $ 41,000
Issuance of common stock for services at $.02 per share
from inception through December 31, 1992 . . . . . . . . . . . . 4,000
Net loss for the year ended December 31, 1992. . . . . . . . . . . $ (77,972) (77,972)
----------- --------

Balance - December 31, 1992 . . . . . . . . . . . . . . . . . . . (77,972) (32,972)
Additional shares sold at $ .02 per share . . . . . . . . . . . . 80,000
Shares issued for services at $ .02 per share. . . . . . . . . . . 10,800
State of common stock in connection with private placement
of stock at $ .20 per share . . . . . . . . . . . . . . . . . . 640,000
Costs related to private placement . . . . . . . . . . . . . . . . (36,530)
Shares issued for services at $ .20 per share . . . . . . . . . . 6,000
Net loss for the year ended December 31, 1993. . . . . . . . . . . (354,333) (354,333)
----------- --------

Balance - December 31, 1993 . . . . . . . . . . . . . . . . . . . (432,305) 312,965
Repurchase of common stock by the Company and cancellation
of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000)
Common stock warrants issued in connection with notes payable . . 4,750
Net loss for the year ended December 31, 1994 . . . . . . . . . . (523,007) (523,007)
----------- --------

Balance - December 31, 1994 . . . . . . . . . . . . . . . . . . . (955,312) (204,292)
Sale of common stock at $ .25 per share. . . . . . . . . . . . . . 450,000
Costs of raising capital . . . . . . . . . . . . . . . . . . . . . (12,250)
Purchase (for $8,000) and resale (for $20,000) of 200,000
shares of common stock . . . . . . . . . . . . . . . . . . . . . 12,000
Capital contributed by stockholder . . . . . . . . . . . . . . . . 25,000
Common stock warrants issued in connection with notes payable. . . 3,750
Net loss for the year ended December 31, 1995. . . . . . . . . . . (392,141) (392,149)
----------- --------

Balance - December 31, 1995. . . . . . . . . . . . . . . . . . . . (1,347,461) (117,941)
Shares issued for services at $ .30 per share. . . . . . . . . . . 25,066
Conversion of debt into common stock . . . . . . . . . . . . . . . 131,400
Sale of common stock in connection with private placement
of stock at $ .70 per share . . . . . . . . . . . . . . . . . . 500,000
Net loss for the nine months ended September 30, 1994. . . . . . . (222,912) (222,912)
----------- --------

BALANCE - SEPTEMBER 30, 1996 (unaudited) . . . . . . . . . . . . . $(1,570,373) $ 315,613
----------- --------
----------- --------

Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.

-4-

APOLLO GENETICS, INC.
(a development stage company)

STATEMENTS OF CASH FLOWS

July 9, 1992 July 9, 1992
Year Ended (Inception) Nine Months Ended (Inception)
December 31, Through September 30, Through
-------------------- December 31, -------------------- September 30,
1995 1994 1995 1996 1995 1996
--------- --------- --------------- --------- --------- ---------------
(Unaudited) (Unaudited)

Cash flows from operating activities:
Net loss........................................ $(392,149) $(523,007) $ (1,347,467) $(222,912) $(305,906) $ (1,570,373)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization.................................. 1,049 1,399 3,934 1,212 786 5,146
Common stock issued for services rendered..... 20,800 25,066 45,866
Organization costs............................ (5,245) (5,245)
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and
accrued expenses........................... 138,971 56,643 216,473 (58,942) 130,697 157,531
--------- --------- --------------- --------- --------- ---------------
Net cash (used in) operating activities... (253,029) (484,965) (1,111,499) (255,576) (174,423) (1,367,075)
--------- --------- --------------- --------- --------- ---------------
Cash liens from financing activities:
Sale of common stock............................ 445,000 1,206,000 387,00 121,000 1,593,500
Stock offering costs............................ (12,250) (48,780) (48,780)
Repurchase of common stock...................... (8,000) (1,000) (9,000) (9,000)
Proceeds from notes payable (Note C)............ 75,000 135,000 210,000 75,000 210,000
Deferred public offering costs.................. (5,000) (5,000)
--------- --------- --------------- --------- --------- ---------------
Net cash provided by financing
activities............................... 499,750 134,000 1,358,220 382,500 196,000 1,740,729
--------- --------- --------------- --------- --------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 246,721 (330,965) 246,721 126,926 21,577 373,645
Cash and cash equivalents at beginning of
period........................................... -0- 330,965 -0- 246,721 -0- -0-
--------- --------- --------------- --------- --------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 246,721 $ -0- $ 246,721 $ 373,845 $ 21,577 $ 373,645
--------- --------- --------------- --------- --------- ---------------
--------- --------- --------------- --------- --------- ---------------
Supplemental disclosures of cash flow information:
Interest paid................................... $ 15,000 $ 15,000 $ 25,00 $ 32,000
Accounts payable converted into stock........... 25,000 25,000 25,000
Capital contributed by forgiveness of debt...... 25,000 25,000 25,000
Notes payable converted to common stock......... 135,000 135,000

Attention is directed to the foregoing auditors' report and
as the accompanying notes to financial statements.

-5-

APOLLO GENETICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS

(Information as of September 30, 1996 and for
the nine months ended September 30, 1996
and 1995 is unaudited)

(NOTE A) - THE COMPANY:

Apollo Genetics, Inc. (the "Company"), was incorporated on July 9, 1992.
The Company's objective is to develop biopharmaceutical products for
deterring aspects of human aging.

The Company is in the development stage and its efforts through December
31, 1995 have been principally devoted to organizational activities, raising
capital and initial research and development activities. It does not expect
commercial operations in the foreseeable future. The Company anticipates that
it will need substantial additional financing to complete its research and to
develop commercial products. The Company is endeavoring to obtain additional
financing for the next phase of its research activities; however, there is no
assurance that such financing can be obtained or that the Company's research
will be successful.

On November 6, 1996 the Board of Directors of the Company authorized the
filing of a registration statement with the Securities and Exchange Commission
for the initial public offering of shares of the Company's common stock.

(NOTE B) - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(1) ORGANIZATION COSTS:

The Company has capitalized certain costs, primarily legal expenses,
related to its organization. These costs are being amortized by the
straight-line method over five years.

(2) PATENT COSTS:

Patent costs will be amortized over the estimated useful lives of
the underlying patents commencing with the date when revenue is earned
related to the patents.

(3) USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

(continued)

- 6 -

APOLLO GENETICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS

(Information as of September 30, 1996 and for
the nine months ended September 30, 1996
and 1995 is unaudited)

(NOTE B) - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)

(4) CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments with a maturity
of three months or less, when acquired, to be cash equivalents.

(5) INTERIM CONDENSED FINANCIAL STATEMENTS:

The condensed financial statements as of September 30, 1996 and for
the nine months ended September 30, 1996 and September 30, 1995 are
unaudited. In management's opinion, the unaudited financial statements as of
September 30, 1996 and for the nine months ended September 30, 1996 and
September 30, 1995, include all adjustments necessary for a fair
presentation. Such adjustments were of a recurring nature.

(NOTE C) - STOCK SUBSCRIPTIONS RECEIVABLE:

All stock subscriptions receivable were paid in full in October 1996.

(NOTE D) - NOTES PAYABLE:

During the 1995 and 1994, the Company issued $210,000 of 10% convertible
notes payable. The notes are due in full at the earlier of September 19, 1997
or the closing of the next offering of common stock of the Company with
aggregate gross proceeds to the Company of not less than $1,000,000. Interest
is payable annually on September 19. The notes may be redeemed at the option
of the Company at a price equal to 110% of the principal amount plus any
accrued and unpaid interest. The notes may be converted into common stock of
the Company at any time prior to the redemption or maturity date. The
conversion price is subject to adjustment as defined in the agreement. The
principal amount of the notes outstanding is $75,000 and $210,000 at
September 30, 1996 and December 31, 1995, respectively. In

- 7 -

APOLLO GENETICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS

(Information as of September 30, 1996 and for
the nine months ended September 30, 1996
and 1995 is unaudited)

(NOTE D) - NOTES PAYABLE: (continued)

conjunction with these notes, the Company issued warrants for the purchase of
700,000 shares of its common stock. The value assigned to the warrants,
amounting to $10,500, has been accounted for as debt discount and is being
amortized over the period of time the notes are expected to be outstanding.
The effective interest rate on the notes, including the debt discount, is
approximately 12%. The warrants are more fully discussed in Note E(3).
Through September 30, 1996 a total of $135,000 of the notes were converted
into 450,000 shares of common stock.

(NOTE E) - COMMON STOCK, OPTIONS AND WARRANTS:

[1] COMMON STOCK:

Through December 31, 1995, the Company has been financed primarily
through the sale of common stock. Through December 31, 1995, of the
11,770,000 shares issued, 11,000,000 were sold for cash and the remaining
770,000 shares were issued for payment of services rendered to the Company.
Through September 30, 1996, of the 13,017,843 shares issued, 12,164,291 were
sold for cash and the remaining 853,552 shares were issued for payment of
services rendered to the Company.

[2] OPTION PLAN:

The Company has a stock option plan that provides for the issuance
of both incentive and nonqualified stock options. This plan provides for the
granting of options to purchase not more than 1,000,000 shares of common
stock. The exercise price of the incentive options cannot be less than the
fair market value on the date of the grant, while the exercise price for the
nonqualified options is determined by the option committee.

(continued)

- 8 -

APOLLO GENETICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS

(Information as of September 30, 1996 and for
the nine months ended September 30, 1996
and 1995 is unaudited)

(NOTE E) - COMMON STOCK, OPTIONS AND WARRANTS: (continued)

[2] OPTION PLAN: (continued)

Option activity through September 30, 1996 has been as follows:

Number of Option Price
Shares Per Share
--------- ------------

Balance - December 31, 1992 -0- $-0-
Granted 200,000 $.20
-------

Balance - December 31, 1993 200,000 $.20
Granted 500,000 $.20 - $.30
-------

Balance - December 31, 1994 700,000 $.20 - $.30
Cancelled (300,000) $.20 - $.30
Granted 600,000 $.10 - $.25
-------

Balance - December 31, 1995 and
September 30, 1996 1,000,000 $.10 - $.30

At September 30, 1996, options to purchase 650,000 shares were
exercisable at an average exercise price of $.26 per share. At September 30,
1996, no options to purchase shares were available for grant under the plan.

In November of 1996, the Company's Board of Directors authorized an
increase of the number of shares of the Company's common stock issuable under
the plan by 1,000,000 shares.

Also in November of 1996, the Company's Board of Directors
authorized the establishment of the 1996 Directors Stock Option Plan, and
reserved 300,000 shares of the Company's common stock for issuance under the
Plan

(continued)

APOLLO GENETICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS

(Information as of September 30, 1996 and for
the nine months ended September 30, 1996
and 1995 is unaudited)

(NOTE E) - COMMON STOCK, OPTIONS AND WARRANTS: (continued)

[3] WARRANTS:

In conjunction with the notes described in Note C, the Company issued
warrants for the purchase of 700,000 shares of the Company's common stock.
The warrants are exercisable until September 17, 1999 at the lower of $.30
per share or the price per share of the common stock at the closing of the
next offering of common stock with aggregate gross proceeds of at least
$1,000,000. The number and character of shares which may be purchased upon
the exercise of these warrants are subject to adjustment as provided in the
warrant agreement.

(NOTE F) - COMMITMENTS:

[1] LEASE:

The Company is currently subleasing its facilities under a
tenant-at-will agreement. Rent expense for the year ended December 31, 1995
amounted to $5,850 and the rent paid since inception is $21,100.

[2] RESEARCH, LICENSE AND CONSULTING AGREEMENTS:

The Company has entered into various research, license and
consulting agreements to support its research and development activities.
These agreements generally expire over several future years. Amounts charged
to operations in connection with these agreements for the year ended December
31, 1995 amounted to approximately $55,000. The Company expects to increase
its research and development expenses in future years.

Some of the above agreements contain provisions for future royalties
to be paid by the Company on the sale of products developed under the
agreements.

[3] EMPLOYMENT AGREEMENT:

The Company has entered into an employment agreement, which expires
on October 31, 1997, with its president which provides for a minimum annual
salary of $100,000 and twelve months of severance pay. The agreement will
automatically extend for a one-year period through October 31, 1998 unless
terminated by either party to the agreement.

(continued)

SCHEDULE H

GRANTS AND OPTIONS

1. The Neurestrol License Option granted pursuant to Section 3.3 of the
Athena Agreement.

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ROYALTY PURCHASE AGREEMENT BETWEEN NEUROSCIENCE PARTNERS LIMITED PARTNERSHIP BY ITS GENERAL PARTNER, MDS ASSOCIES-NEUROSCIENCE INC. - AND - APOLLO GENETICS, INC. DECEMBER 18, 1996

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