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                                                                    EXHIBIT 10.5

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION


                               SERVICES AGREEMENT
                      FOR PRODUCTION AND RELEASE TESTING OF
                  ENCAPSULATED PORCINE XENOTRANSPLANT PRODUCTS


         This Services Agreement for cGMP Manufacturing production and release
testing of encapsulated porcine xenotransplant product for MicroIslet, Inc. (the
"Agreement"), dated this 1st day of September 2007, is entered into by and
between Progenitor Cell Therapy, LLC, having an address at 21 Main Street, Court
Plaza South, East Wing, Suite 304, Hackensack, New Jersey 07601 (hereinafter
called "PCT") and MicroIslet, Inc, having an address at 6370 Nancy Ridge Drive,
Suite 112 San Diego, CA 92121 (hereinafter called "MICROISLET").

WHEREAS, MICROISLET ((MI) WWW.MICROISLET.COM) is a public biotechnology company
engaged in the research, development and commercialization of patented
technologies in the field of transplantation therapy for patients with diabetes;
MICROISLET has licensed several technologies from Duke University Medical Center
developed over the last decade for the isolation, culture, storage and
encapsulation of insulin-producing porcine islet cells; MICROISLET believes that
these proprietary methods are among the most important advances in the field of
transplantation that may enable diabetic patients to become free from insulin
injections; MICROISLET's ultimate goal is to offer a solution towards a cure for
diabetes worldwide;

         WHEREAS, PCT is a contract manufacturing organization dedicated to the
manufacture, testing and delivery of cellular therapeutics, with facilities in
Mountain View, California and Hackensack, New Jersey, holds a California Drug
Manufacturing License for the conduct of clinical trial manufacture and
distribution of cells products, is registered with the FDA as an HCT/P facility,
and maintains cGMP Quality Systems compliant with applicable United States
regulations;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each Party to the other, the
Parties, intending to be legally bound, hereby covenant and agree as follows:


TERMS
-----

         As used in this Agreement the following terms shall have the following
meanings:

         AGREEMENT                  This Agreement including its attachments and
                                    as the Agreement or its attachments,
                                    including the Quality Agreement, may be
                                    amended through Program Amendment Order.

         APPLICABLE                 LAWS All laws, ordinances, rules, orders and
                                    regulations of any state, federal or local
                                    governmental or regulatory authority that
                                    govern the Services or Product including,
                                    without limitation, the United States
                                    Federal Food, Drug and Cosmetic Act, HIPAA
                                    and the regulations and guidelines of the
                                    FDA and other Regulatory Agencies.

                                      -1-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION


         FDA                        Means the United States Food and Drug
                                    Administration, or any successor agency
                                    thereto.

         FORCE MAJEURE              Any cause beyond the reasonable control of
                                    the Party in question which for the
                                    avoidance of doubt and without prejudice to
                                    the generality of the foregoing includes
                                    governmental actions, war, riots, terrorism,
                                    civil commotion, fire, flood, epidemic,
                                    labor disputes (excluding labor disputes
                                    involving the work force or any part thereof
                                    of the Party in question), restraints or
                                    delays affecting shipping or carriers, and
                                    act of God.

         CGMP                       Current Good Manufacturing Practice
                                    regulations, as set forth in the United
                                    States Code of Federal Regulations Title 21
                                    (21 C.F.R. ss.ss. 210 and 211), as amended
                                    from time to time, and subject to the
                                    requirements set forth in the Quality
                                    Agreement.

         CGTP                       Current Good Tissue Practice regulations, as
                                    set forth in the United States Code of
                                    Federal Regulations Title 21 (21 C.F.R. ss.
                                    1271 subpart 2), as amended from time to
                                    time, and subject to the requirements set
                                    forth in the Quality Agreement.

         MANUFACTURE                Means manufacture of the Product in
                                    accordance with this Agreement, including
                                    any amendments made thereto in accordance
                                    with this Agreement.

         POINT                      OF CONTACT Each Party shall appoint a Point
                                    of Contact which will serve as that Party's
                                    point of contact for the other Party, as
                                    further detailed in Section 1 of this
                                    Agreement.

         PRODUCT                    Encapsulated porcine islet cell product or
                                    any batch or unit thereof

         PROGRAM                    Stages 1 through 5 of the Scope of Work as
                                    outlined in Attachment A of this Agreement.

         PROGRAM                    A document detailing changes to the Program,
         AMENDMENT ORDER            which has been agreed to and signed by both
                                    Parties and is in the form attached to and
                                    made a part of this Agreement as "Attachment
                                    B". The elements and conditions of a Program
                                    Amendment Order are described in Section 2,
                                    Attachment B, and elsewhere in this
                                    Agreement.

         PROPOSAL                   The "Proposal by Progenitor Cell Therapy,
                                    LLC to "Provide Contract Manufacturing
                                    Support Services for MicroIslet, Inc. Ver 2"
                                    dated August 3, 2007

         QUALITY AGREEMENT          The document agreed to by the Parties which
                                    sets forth and governs the roles and
                                    responsibilities of each Party's personnel
                                    in relation to quality assurance matters
                                    relating to the transactions contemplated


                                      -2-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION


                                    under this Agreement, a copy of which is
                                    attached to and made a part of this
                                    Agreement as Attachment C (the "Quality
                                    Agreement").

         REGULATORY AGENCY          Any relevant state, federal or local
                                    governmental regulatory authority, within or
                                    outside of the United States, involved in
                                    regulating any aspect of the conduct,
                                    development, manufacture, storage,
                                    distribution, export, import, market
                                    approval, sale, packaging or use of the
                                    Services, the Program or the Product,
                                    including the FDA.

         SERVICES                   Those services, products, and reports to be
                                    provided by PCT as expressly set forth and
                                    more particularly described in Stages 1
                                    through 5 of Attachment A to this Agreement
                                    in accordance with the terms and conditions
                                    set forth in this Agreement and all its
                                    Attachments and in compliance with
                                    Applicable Laws.

         STAGE                      Each distinct step or stage of the Program
                                    as described in Attachment A to this
                                    Agreement.

         TERMINATION                This Agreement will terminate upon
                                    completion of the Program by satisfactory
                                    performance of the Service or upon
                                    termination affected pursuant to section 7.

         THIRD PARTY                Any person other than the Parties or their
                                    respective Affiliates.


1.       SERVICES TO BE PERFORMED
         ------------------------

         A. PCT shall furnish to MICROISLET the Services set forth in Attachment
A which is attached hereto and incorporated herein by reference.

         B. PCT shall provide the required personnel and support necessary to
perform the Services which shall be carried out primarily at PCT's Mountain
View, California facility, located at 291 North Bernardo Avenue, Mountain View,
California 94043.

         C. PCT's point of contact at MICROISLET, with respect to the Services
to be provided herein is Michael Andrews or any other party designated in
writing by MICROISLET (hereinafter called "Point of Contact").

         D. MICROISLET's point of contact at PCT with respect to the Services to
be provided herein is Stewart Craig, PhD, or another party designated in writing
by PCT.

         E. If there is any conflict between the terms of the Proposal, the
Quality Agreement or this Agreement, the terms of this Agreement shall control
and govern.

         F. MICROISLET agrees to fulfill its responsibilities as set forth in
the Quality Agreement and acknowledges and agrees that in order for PCT to carry
out the Program, MICROISLET must satisfy its obligations under this Agreement,


                                      -3-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



including the Quality Agreement. PCT agrees to fulfill its responsibilities as
set forth in the Quality Agreement and acknowledges and agrees that in order for
MICROISLET carry out its obligations, PCT must satisfy its obligations under
this Agreement, including the Quality Agreement.

         G. It shall not be considered a breach of this Agreement by either
Party if a Party is unable to fulfill its obligation due to action or inaction
by the other Party. The Parties hereby acknowledge and agree that because the
work to be performed hereunder is by its nature developmental, PCT can only
assure compliance with MICROISLET's specifications as outlined in this Agreement
and makes no warranty or guaranty whatsoever regarding the achievement of a
successful outcome for the Program.


2.       PAYMENT FOR SERVICES
         --------------------

         A. MICROISLET shall pay to PCT, for Services as specified in Stages 1
through 4 set forth in Attachment A, a total of [***] on the following schedule:

DATE                                                                      AMOUNT
[***]                                                                     [***]
[***]                                                                     [***]
[***]                                                                     [***]
[***]                                                                     [***]
                                                               [***]      [***]

         B. MICROISLET agrees that all payments of the Program Charges are due
thirty (30) days after the invoice dates as set forth above and that any
payments which remains unpaid forty-five (45) calendar days after the date when
due shall then begin to accrue interest at the annual rate of [***] until paid
in full (the "Default Rate").

         C. Any change in Program is subject to agreement in advance through a
Program Amendment Order (PAO) in the form attached in Attachment B. Regulatory
consulting, writing services, and attendance at meetings between the FDA and
MICROISLET, other than those Services outlined in Stage 3 of the Program, are
not included in the Services but are offered at the consulting rates outlined in
Attachment A

         D. PCT shall invoice MICROISLET in accordance with the payment schedule
set forth in this section. Such invoices shall be forwarded to the attention of
the Point of Contact, in paper form at the aforementioned address or electronic
form by email.

         E. MICROISLET shall reimburse PCT for all reasonable and necessary
travel expenses to such places as PCT may travel in the performance of such
Services as requested by MICROISLET. All travel is to be approved in advance by
the MICROISLET Point of Contact. PCT shall provide an itemized expense
statement, along with itemized receipts for such expenses on a monthly basis.
Such itemized expense statements shall be forwarded to the attention of the
Point of Contact, in paper form at the aforementioned address or electronic form
by email.

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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



         F. MICROISLET shall reimburse PCT for reasonable and necessary
materials and supplies required to perform the Services set forth in Attachment
A and for such other services for and requested by MICROISLET. PCT shall obtain
the prior approval of MICROISLET for any single purchase of supplies or reagents
in excess of [***]. PCT shall provide an itemized expense statement for such
expenses on a monthly basis. Such itemized expense statement shall be forwarded
to the attention of the Point of Contact, in paper form at the aforementioned
address or electronic form by email. Any materials or supplies for which
MICROISLET has reimbursed PCT will be delivered to MICROISLET upon completion of
the Services or termination of this Agreement, if so requested by MICROISLET. A
[***] percent ([***]%) fee will be added to the total of each monthly expense
reimbursement statement and a [***]% handling fee added to the cost of any
shipment made by PCT to or at the request of MICROISLET. MICROISLET shall pay
PCT for Services performed by PCT and expenses incurred by PCT which are
properly documented and invoiced in accordance with this Section 2 and
Attachment A, within thirty calendar (30) days following receipt of the
applicable invoice and/or itemized expense statement submitted by PCT.

         G. The Parties agree that any changes to this Agreement, including a
change in the scope of work set forth in Attachment A, including election of
additional work under Stage 5, must be made in writing in the form of a Program
Amendment Order. The Parties recognize that changes to the scope of work,
whether by way of increasing or decreasing the services to be provided, may
result in corresponding changes to the timing or amount of the payments that are
due to PCT.

         H. [***] will be responsible for the costs of any Product disposal as
may be required by the provisions of the Quality Agreement attached hereto.

         I. [***].


3.       CONFIDENTIAL INFORMATION
         ------------------------

         The Parties entered into a confidentiality agreement signed by he last
of the Parties on 6 October 2007 (the "Confidentiality Agreement"), attached
hereto as Attachment D, which governs the handling of confidential information
between the Parties. PCT and MICROISLET ratify and affirm the terms and
conditions contained in the Confidentiality Agreement and its applicability to
this Agreement and hereby extend the term of the Confidentiality Agreement to a
period of three (3) years following the termination or expiration of this
Agreement.

Notwithstanding the foregoing or anything contained in the Confidentiality
Agreement, nothing shall prohibit either Party from summarizing the terms of
this Agreement, or from filing this Agreement as an exhibit, in documents such
Party is required to file with any government agency, including the Securities
and Exchange Commission; provided that such disclosure shall be only to the
extent required to comply with applicable laws, and further provided that the
Party proposing to make such disclosure shall provide a copy of the proposed
disclosure to the other Party in advance of such disclosure, and the Parties
shall mutually agree to the content of such disclosure. Except as set forth in
this Section 3, to the extent that there is any discrepancy between this
Agreement and the Confidentiality Agreement, the Parties agree that the
provisions contained in the Confidentiality Agreement shall prevail.

                                      -5-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



4.       DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY
         --------------------------------------------------

         A. PCT shall promptly disclose, in writing to MICROISLET all patentable
and un-patentable inventions, ideas, discoveries, improvements, design rights,
semiconductor mask works, works of authorship, copyrights, trade secrets,
know-how and any equivalents thereof (hereinafter called "INTELLECTUAL
PROPERTY") made, developed or conceived which arises out of the Services
rendered pursuant to this Agreement or out of CONFIDENTIAL INFORMATION of
MICROISLET provided to and/or acquired by PCT in connection with this Agreement,
regardless of whether such information ceases to be Confidential Information.
All such INTELLECTUAL PROPERTY shall be owned solely and exclusively by and vest
entirely in MICROISLET.

         B. PCT shall and does hereby irrevocably grant and assign to MICROISLET
the entire assignable right, title and interest, without further compensation,
in and to any and all of the INTELLECTUAL PROPERTY referred to in Section 4(A)
above, together with: (i) the right to apply for patents and/or copyright
registrations thereon in any and all countries of the world, and (ii) the entire
right, title and interest in and to any and all applications for patents and
copyright registrations which may be prepared or filed thereon at MICROISLET's
discretion and expense, and in and to any and all of the eventuating patents and
copyright registrations.

         C. PCT agrees that all works of authorship shall be deemed "works made
for hire" for MICROISLET within the meaning of the U.S. Copyright Law, and if
they are held to not so qualify, all ownership rights thereto will be
transferred to MICROISLET.

         D. PCT, at MICROISLET's request, shall execute and deliver to
MICROISLET all descriptions, applications, assignments and other documents and
instruments in its possession necessary or proper to carry out the provisions of
this Agreement; PCT shall be reimbursed at its then current consulting rates or
at a mutually agreeable negotiated price plus out-of-pocket expenses, and will
make best commercial business efforts to cooperate with and assist MICROISLET or
its nominees in all reasonable ways and at all reasonable times, including, but
not limited to, testifying in all legal proceedings, signing all lawful papers
and in general performing all lawful acts reasonable, necessary or proper, to
aid MICROISLET in obtaining, maintaining, defending and enforcing all lawful
patent, copyright, trade secret, know-how and the like in the United States and
elsewhere; and PCT shall maintain such information and communications in
confidence as Confidential Information.

         E. Nothing contained herein shall be construed to grant to PCT any
rights to technology or any license under any patent, copyright or trademark now
or hereinafter in existence except for the limited purposes set forth herein.


5.       RELATIONSHIP OF PARTIES
         -----------------------

         This Agreement does not create an employer-employee relationship
between MICROISLET and PCT. PCT shall not hold itself out as an agent or
representative of MICROISLET. PCT agrees that all services herein shall be
rendered by it as an independent contractor, and PCT shall have no authority to
negotiate or execute agreements on behalf of MICROISLET or otherwise bind or
obligate MICROISLET in any manner. In addition, PCT shall not be eligible to
participate in any employee benefit program of MICROISLET.

                                      -6-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



6.       REPRESENTATIONS AND WARRANTIES
         ------------------------------

         A. General Representations and Warranties. Each Party represents and
warrants to the other that it has the necessary right and authority to enter
into this Agreement and that to the best of its knowledge as of the Effective
Date it is the rightful owner of all Intellectual Property it purports to own.
Neither Party makes any representation or warranty to the other except as
specified in this Agreement.

         B. Representations and Warranties of PCT.
            1)  PCT hereby represents and warrants to MICROISLET that PCT and
                its employees, agents, sub-contractors and representatives
                providing the services hereunder shall have reasonable expertise
                in the relevant subject matter, and shall perform its
                obligations under this Agreement in a professional and
                workman-like manner with due care.
            2)  Compliance by PCT. PCT's Mountain View, California facility
                shall operate in compliance with Applicable Laws and the Quality
                Agreement.
            3)  Permits. PCT shall obtain and maintain necessary permits,
                licenses and authorizations as required under this Agreement and
                Applicable Laws with respect to the Services.
            4)  Personnel. Neither PCT, its subcontractors, agents nor any
                members of their respective staffs involved in providing the
                Services shall be, at the time of performance of any Services:
                (i) disqualified or debarred by the FDA or any other Regulatory
                Agency for any purpose pursuant to 21 U.S.C. ss. 335a or any
                foreign counterpart thereof; or (ii) convicted under United
                States federal law or foreign counterpart thereof, for conduct
                relating to the development or approval, or otherwise relating
                to the regulation of, any drug under the Generic Drug
                Enforcement Act of 1992 or any other relevant statute, law or
                regulation.
            5)  PCT represents and warrants that it is under no obligation to
                any third party that would interfere with its rendering to
                MICROISLET consulting and product development services as herein
                defined or which would be inconsistent with any of its
                representations or obligations during the terms of this
                Agreement.
            6)  PCT represents and warrants that the Product will meet the
                specifications set out in this Agreement and the Attachments and
                amendments hereto.
            7)  Patents. In performing any of its work or carrying out its
                obligations under this Agreement, PCT shall not knowingly
                infringe upon any United States or foreign copyright, patent,
                trademark, trade secret or other proprietary right, or
                misappropriate any trade secret, of any third Party in any
                manner that would cause any liability, loss or damage to
                MICROISLET, and PCT represents and warrants that it has neither
                assigned nor otherwise entered into any agreement by which it
                purports to assign or transfer any right, title or interest to
                any technology or intellectual property right that would
                conflict with its obligations under this Agreement.

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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



         C. Representations and Warranties of MICROISLET.
            1)  Compliance with Obligations. MICROISLET hereby represents and
                warrants to PCT that it shall perform its obligations under this
                Agreement in a professional manner with due care.
            2)  Compliance. MICROISLET shall obtain and maintain all necessary
                permits, licenses and authorizations as required under this
                Agreement and by all Applicable Laws with respect to the
                Manufacture and human clinical use of the Product.
            3)  Personnel. Neither MICROISLET, its subcontractors, agents nor
                any members of their respective staffs involved in the
                Manufacture, package or storage of the Product shall be, at the
                time of performance of any such activity hereunder: (i)
                disqualified or debarred by the FDA or any other Regulatory
                Agency for any purpose pursuant to 21 U.S.C. ss. 335a or any
                foreign counterpart thereof; or (ii) charged with or convicted
                under United States Federal law or foreign counterpart thereof,
                for conduct relating to the development or approval, or
                otherwise relating to the regulation of, any drug under the
                Generic Drug Enforcement Act of 1992 or any other relevant
                statute, law or regulation.
            4)  Patents. In performing any of its work or carrying out its
                obligations under this Agreement, MICROISLET shall not knowingly
                infringe upon any United States or foreign copyright, patent,
                trademark, trade secret or other proprietary right, or
                misappropriate any trade secret, of any third Party in any
                manner that would cause any liability, loss or damage to PCT,
                and MICROISLET represents and warrants that it has neither
                assigned nor otherwise entered into any agreement by which it
                purports to assign or transfer any right, title or interest to
                any technology or intellectual property right that would
                conflict with its obligations under this Agreement.
            5)  Materials. All materials, reagents, and porcine islets required
                for the process can be sourced and are of a grade/nature/origin
                acceptable for cGMP use and for human administration according
                to all Applicable Laws and PCT's standards.

         D. DISCLAIMER of Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO THE PRODUCT,
SERVICES AND PROGRAM TO BE SUPPLIED BY SUCH PARTY HEREUNDER AND BOTH PARTIES
SPECIFICALLY DISCLAIM ALL EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES WITH
RESPECT TO THE PRODUCT, SERVICES AND/OR PROGRAM, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR NONINFRINGEMENT, OR ANY
IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE
OF TRADE.


7.       DURATION AND TERMINATION
         ------------------------

         A. Except for the obligations described in Sections 3, 4, 5 and 6
above, which shall survive termination of this Agreement, this Agreement shall
be in effect for the period defined in Attachment A from the Effective Date.

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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
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WITH THE SECURITIES AND EXCHANGE COMMISSION



         B. MICROISLET, at its option, may terminate this Agreement with or
without cause upon submitting written notice to PCT. In the event of termination
without cause, MICROISLET shall pay [***].

         C. Should either party hereto fail to perform any non-monetary material
term, condition or covenant of this Agreement or if either party shall breach
any representation or warranty contained in this Agreement, then upon written
notice of such failure from the other party, the party in breach or default
shall have thirty (30) days from the date of notice to correct the breach or
default, and upon failure to do so, this Agreement shall automatically terminate
for cause.

                It is understood that the Parties intend to discuss, pursuant to
the provisions of this section, any alleged breach and its remediation as soon
as it is known, and that such discussion shall not be a waiver of the right to
terminate pursuant to this Agreement. For purposes of this Agreement: (i) a
Substantial Breach shall be defined as a breach by a Party that directly caused
a significant delay or obstacle that prevented the Non-Breaching Party from
achieving a material goal or objective as contemplated under this Agreement, and
shall also include a breach by MICROISLET for failure to pay PCT any fees or
charges owed when due; and (ii) no breach that is caused or contributed to by
the Non-Breaching Party or Force Majeure shall constitute a Substantial Breach.

                Upon termination for cause, the non-breaching Party shall be
entitled to pursue any and all remedies available to it at law or in equity. In
addition, if MICROISLET is the non-breaching Party, in addition to any other
available remedy, all obligations to make any payments pursuant to this
Agreement shall cease with the exception of [***].

         D. This Agreement may be automatically and immediately terminated by
either Party, upon providing written notice to the other Party, if the other
Party has a liquidator, receiver, manager receiver or administrator appointed,
or ceases to continue trading or is unable to pay debts.

         E. Termination under this Section 7 shall not relieve PCT's obligations
under Sections 3, 4, 5 and 6 hereof, nor shall it relieve PCT from any liability
arising from any breach of this Agreement.


8.       INDEMNIFICATION & LIMITATION OF LIABILITY
         -----------------------------------------

         PCT shall indemnify, defend and hold harmless MICROISLET, MICROISLET's
agents, servants and employees, from and against all claims, damages, losses and
expenses, and liabilities of any nature whatsoever, including reasonable
attorney's fees and disbursements (collectively, "Claims"), incurred, caused,
based upon, arising out of or resulting from or failure to perform, or
misrepresentation with respect to, any of the terms, covenants or conditions of
this Agreement, except to the extent incurred, caused or occasioned by, in
connection with or arising out of the acts or omissions of MICROISLET and/or
MICROISLET's Agents including MICROISLET's violation or failure to perform, or
misrepresentation with respect to, any of the terms, covenants or conditions of
this Agreement.

         Nothing in this Agreement shall be deemed to require PCT to indemnify
MICROISLET for or with respect to any bodily injury caused by the Product.
MICROISLET hereby acknowledges that it has exclusive control and decision making
authority with respect to: (i) the specifications that govern the Manufacture
and use of the Product, and (ii) specifications that govern the Manufacture,


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WITH THE SECURITIES AND EXCHANGE COMMISSION



packaging and distribution of the Product. MICROISLET further acknowledges that
PCT has no control over the "use" of the Product after being shipped by PCT in
accordance with this Agreement.

         MICROISLET shall defend, indemnify and hold PCT and PCT's agents
harmless from and against any and all Claims incurred, caused or occasioned by,
in connection with or arising out of (i) the Products, including their use in
the treatment of human subjects; and (ii) any acts or omissions of MICROISLET
and/or MICROISLET's agents, including MICROISLET's violation or failure to
perform, or misrepresentation with respect to, any of the terms, covenants or
conditions of this Agreement, except to the extent incurred, caused or
occasioned by, in connection with or arising out of the acts or omissions of PCT
and/or PCT's Agents including PCT's violation or failure to perform, or
misrepresentation with respect to, any of the terms, covenants or conditions of
this Agreement.

Each Party's indemnification obligations to the other Party shall survive the
expiration or earlier termination of this Agreement.

NEITHER PARTY'S LIABILITY TO THE OTHER SHALL EXCEED AN AMOUNT [***] UNDER THIS
AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL
DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, NO LIABILITY
FOR SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES (INCLUDING
DAMAGES RELATING TO LOST PROFITS, LOST BUSINESS OR LOST SAVINGS), EVEN IF A
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF AND/OR INCURRED SUCH DAMAGES.


9.       PROSPECTIVE EVENTS.
         -------------------

         A. For purposes of this section, the following terms shall have the
meanings given to them as set forth below:

                  "PROSPECTIVE ILLEGALITY" means any state or federal statute or
         common law, or state or federal administrative agency rule, guidance or
         directive now existing or enacted or promulgated or re-interpreted
         after the Effective Date of this Agreement that is interpreted by
         judicial decision, a regulatory agency or legal counsel in such manner
         as to result in the conclusion that any act or service required of PCT
         or MICROISLET under this Agreement is in violation of such law, rule,
         guidance or directive.

                  "PROSPECTIVE COST INCREASE" means the enactment of a state or
         federal statute, common law, state or federal administrative agency
         rule, guidance or directive or amendment thereof after the Effective
         Date of this Agreement and not contemplated before the Effective Date
         as to which compliance by PCT imposes an extraordinary and
         unanticipated financial burden that is generally applicable to all
         providers of cell processing services.

         B. Effect of a Prospective Illegality. In the event of a Prospective
Illegality, MICROISLET and PCT shall promptly negotiate in good faith amendments
to this Agreement as necessary to address such Prospective Illegality. Pending
agreement on the appropriate amendment, either MICROISLET or PCT, on fourteen
(14) days written notice to the other, may cease to perform a questioned act;
provided, however, that this Agreement will nevertheless be performed by both
MICROISLET and PCT to the extent possible.

                                      -10-


<Page>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



         C. Effect of a Prospective Cost Increase. In the event of a Prospective
Cost Increase, MICROISLET and PCT shall negotiate in good faith amendments to
the payment terms of this Agreement to address such cost increase. To the
maximum extent possible, any such amendment agreed to under this Clause shall
preserve the primary benefits sought to be achieved by this Agreement and the
underlying economic and financial arrangements between the Parties. If
MICROISLET and PCT agree that the primary benefits sought to be achieved by this
Agreement cannot be achieved through an appropriate amendment, then this
Agreement will be automatically terminated one hundred twenty (120) days
thereafter, or on a sooner date as may be mutually agreed upon by the Parties,
as "without cause" pursuant to Section 7.C of this Agreement..


10.      REGULATORY ASSISTANCE
         ---------------------

         A. Regulatory Actions. PCT shall permit the FDA and other Regulatory
Agencies to conduct inspections of PCT's Mountain View, California Facility (the
"MV Facility") as they may request, including pre-approval inspections, and
shall cooperate with such Regulatory Agencies with respect to the inspections
related to the Services or the Product. PCT shall give MICROISLET prior notice,
to the extent practicable, of any such inspections, and keep MICROISLET informed
about the results and conclusions of each regulatory inspection, including
actions taken by PCT to remedy any conditions cited in the inspections. If prior
notice is not possible, PCT shall promptly (i.e., within one day of the said
inspection) inform MICROISLET in the event that a regulatory inspection affects
work carried out at PCT's facilities on behalf of MICROISLET. In addition, PCT
shall permit MICROISLET or its representative to assist in the preparation for
and be present at inspections relating to the Services or the Product. Within
five (5) days of receipt by PCT, PCT shall provide MICROISLET with copies of any
written inspection reports issued by the Regulatory Agency and all
correspondence between PCT and the Regulatory Agency which relate to the
Services or the Product, including FDA Form 483, "Notice of Observation," and
all related correspondence, in each case relating to the Services or the
Product; provided, however, PCT may exclude from such copies any references to
the name and any identifying information specific to other non-MICROISLET
products. Similarly, PCT agrees to promptly (i.e., within five (5) days of
receipt by PCT) notify and provide MICROISLET copies of any request, directive
or other communication of the FDA or other Regulatory Agency relating to the
Services or the Product and to cooperate with MICROISLET in responding to such
requests, directives and communications.

         B. Information. PCT shall as soon as it reasonably can and upon
reasonable request by MICROISLET, provide MICROISLET with the development
reports, qualification reports and testing data related to the Services or the
Product, for use by MICROISLET in compiling regulatory submissions. Upon
reasonable request by MICROISLET, PCT shall also provide summary reports and
information regarding the facility, systems, utilities and equipment
construction, commissioning and qualification as these specifically pertain and
are limited to MICROISLET's Program.

         C. Regulatory support. In addition to the documentation requirements
under this Section, and if requested by MICROISLET, regulatory support (i.e.,
writing of regulatory submissions, annual or periodic reports, adverse drug
reporting, product recalls, correspondence and responses to requests, directives
and agency communications etc.) will be provided by PCT at the rate detailed in
this Agreement.

                                      -11-


<Page>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



11.      FACILITY OBLIGATIONS
         --------------------

         A. Audits. MICROISLET may conduct a GMP compliance audit at the MV
Facility once every calendar year upon providing PCT with a minimum of thirty
(30) calendar days' prior written notice.

         B. On site meetings. Project team and technical meetings may be held on
site at the MV Facility as required by the project progression. Such meetings
will review the progress of the project, including issues arising out of, and
the follow-up with regard to, actions, investigations and deviations.


12.      INSURANCE
         ---------

         A. Each Party shall, at all times during the period of this Agreement,
obtain and maintain insurance coverage with limits no less than:

                  Comprehensive General Liability (including coverage for bodily
                  injury an property damage) - [***]aggregate, per occurrence;

                  Workers Compensation - the minimum statutory amounts under
                  applicable laws; and

         B. PCT shall, at all times during the period of this Agreement, obtain
and maintain Professional Liability insurance coverage with limits no less than
[***] dollars.

         C. MICROISLET shall, immediately prior to the initiation of human
clinical trials, and at all times afterward for the duration of this Agreement,
and for a period of ten (10) years following the termination or earlier
expiration of this Agreement, obtain and maintain Product Liability insurance
coverage with limits no less than [***] dollars per occurrence.

         D. Certificates and Changes. Each Party shall furnish to the other a
certificate of such insurance evidencing the required policies of insurance set
forth above, which certificate shall provide that no such policy shall be
materially altered, amended or cancelled without providing the other Party with
at least thirty (30) calendar days prior written notice of such change.

         E. Waivers of Subrogation. Each Party hereby waives any and all rights
it may have against the other and its respective subcontractors, agents and
employees for damages caused by fire or other causes of loss to the extent
covered by insurance required to be provided under this Agreement (the "Amount
of Coverage") except such rights it may have to proceeds of such insurance held
by it as a fiduciary. Each Party shall require of its sub-subcontractors, agents
and employees, by appropriate agreements, written where legally required for
validity, similar waivers in favor of the other Party and its respective
subcontractors, agents and employees. The insurance policies shall provide such
waivers of subrogation by endorsement or otherwise. A waiver of subrogation
shall be effective up to the Amount of Coverage as to a person or entity even
though that person or entity would otherwise have a duty of indemnification,
contractual or otherwise, did not pay the insurance premium directly or
indirectly, and whether or not the person or entity had an insurable interest in
the property damaged.

                                      -12-


<Page>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



13.      MISCELLANEOUS
         -------------

         A. Any notice or other communication required or permitted by this
Agreement shall be deemed to have been validly given if the same shall be mailed
by registered or certified mail, postage prepaid, and addressed to the proper
party at the address provided at the outset of this Agreement.

         B. This Agreement may not be assigned by PCT without the written prior
consent of MICROISLET.

         C. PCT shall not use MICROISLET's name or any adaptation of it in any
advertising, promotional or sales literature without the prior written approval
of MICROISLET. `

         D. MICROISLET shall not use PCT's name or any adaptation of it in any
advertising, promotional or sales literature without the prior written approval
of PCT. PCT shall permit MICROISLET to issue a press release in connection with
this Agreement in a form approved by PCT.

         E. All Services described herein are to be performed and supervised by
PCT. Any ancillary support services which MICROISLET agrees in writing may
performed by others shall comply with all the conditions prescribed by this
Agreement.

         F. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of MICROISLET to which this Agreement relates and shall
be binding upon and inure to the benefit of the successors and assigns of PCT.

         G. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof. No modification of this
Agreement shall be effective unless it is in writing and is signed by each
party. There are no understandings, representations, or warranties except as
herein expressly set forth.

         H. This Agreement shall be governed by the laws of the State of
Delaware, without reference to choice or conflict of law principles, otherwise
applicable. The parties consent and agree that the State and/or United States
Federal District Court for the District of Delaware shall have sole and
exclusive jurisdiction over any controversy arising out of, connected with or
associated with this Agreement.

         I. PCT hereby acknowledges that its breach of this Agreement would
cause irreparable harm and significant injury to MICROISLET that may be
difficult to ascertain and that a remedy at law would be inadequate.
Accordingly, PCT agrees that MICROISLET shall have the right to seek and obtain
immediate injunctive relief to enforce obligations under the Agreement in
addition to any other rights and remedies it may have.

         J. Prior to any dispute, difference, or disagreement concerning this
Agreement proceeding to litigation or arbitration, the Parties shall seek to
resolve the matter within thirty (30) calendar days of this section of the
Agreement being cited in a written communication to the other Party's Chief
Executive Officer.

                                      -13-


<Page>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.
___________________
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION



         K. If any provision of this Agreement is declared void or
unenforceable, such provision will be severed from this Agreement, and the
balance of the Agreement will remain in full force and effect.

         L. In case of discrepancy between any appendices and/or attachments and
this Agreement, the terms and conditions of this Agreement shall prevail.

         M. This Agreement may be executed by facsimile signature and/or in
counterparts, with each such facsimile signature being deemed an original and
both counterparts, when taken together, constituting one instrument.


         Each person executing this Agreement represents and warrants that they
are acting on behalf of a party, as identified in the first paragraph of this
Agreement, and not in an individual capacity. Each person executing this
Agreement further represents and warrants that they are authorized to enter into
such Agreements for and on behalf of their respective party.



PROGENITOR CELL THERAPY, LLC             MICROISLET INC


By: /s/ Robert A. Preti, PhD             By: /s/ Ron Katz
    --------------------------------         ----------------------------------
Robert A. Preti, PhD                     Ron Katz
President & Chief Scientific Officer     Chairman, Board of Directors

Date:                                    Date:

                                      -14-


<Page>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.



                                  ATTACHMENT A
                         PROJECT SCOPE, STAGES, AND FEES


SUMMARY OF THE MANUFACTURING PROCESS AND OVERALL REQUIREMENTS FOR THE PROJECT

MICROISLET is developing encapsulated islet technologies for the treatment of
insulin dependent diabetes. MICROISLET is currently conducting preclinical
efficacy and safety studies in various rodent and non-human primate models using
encapsulated porcine islets. MICROISLET intends to develop an encapsulated
porcine islet product (xenotransplantation program).

By way of this Agreement, MICROISLET is contracting to PCT the entire process
for production and release testing of the encapsulated porcine xenotransplant
product. MICROISLET will transfer the technology of the manufacturing process
and associated test methods commencing such that the process can be GMP
qualified in a suitable GMP facility ready to conduct a 10 - 15 patient phase I
clinical trial. MICROISLET also requires assay development services and will
require PCT to provide regulatory support services. It is likely that this
clinical trial will initiate with ex-US sites and patient enrollment.

The xenotransplant product is a combination biologic and device product in which
the pharmacologically active agent, insulin, is released from encapsulated,
functional porcine islet cells by natural means in response to blood glucose
concentrations. The device component is an average [***] um diameter
microcapsule of calcium alginate containing up to an average of [***] islet
equivalents (IEQ).

The Parties agree that this Agreement is based on an understanding that the
process for the manufacture, testing and delivery of MICROISLET's xenotransplant
product is comprised as follows:

     1.  Pancreas Procurement - The pancreata will be procured from an
         accredited herd of pigs reared and maintained by a facility in
         Minnesota. The organs will be shipped immediately to the PCT facility
         for processing.

     2.  Islet Isolation - The organs will be processed at the PCT facility
         using procedures provided by MI. Upon completion of the isolation, the
         islets will be [***] and QC analysis conducted. Upon QC approval, the
         next day, islets will be encapsulated.

         It is projected that [***] staff using [***] can process [***]
         pancreata in a [***] to provide sufficient islets for onward
         encapsulation of a [***] dose for a human subject. A verifier and QC
         staff will be available for this operation.

     3.  Encapsulation - In this process, islets are [***] in [***] and [***]
         by [***]. The islets are then [***] in an [***] solution and [***] and
         the procedure will be done in a Class 100 laminar airflow hood using
         aseptic techniques to ensure sterility. QC analysis on the
         encapsulated islets will be required. The encapsulated islets will
         either be tested and prepared (See (5) below) for [***] transplant
         center.

         It is projected that [***] staff using [***] can produce sufficient
         encapsulated islets in a [***] a single dose for a human subject. A
         verifier and QC staff will be available for this operation.

                                      -15-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


     4.  Analytical Methods and Controls - The [***] of the isolated islets
         prior to encapsulation will be monitored using assay methods provided
         by MI. After encapsulation of the islets, [***] will likely be
         performed on the encapsulated islets.

         Additional assays [***] to evaluate the microcapsules may also be
         required. However, such assays may need to be developed and release
         specifications set. Upon election by MICROISLET, PCT may be contracted
         to develop and or qualify additional assays as detailed in Stage 5
         below.

     5.  Preparation of the final product for the patient - Encapsulated islets
         may be [***] at the contract GMP facility for up to [***] prior to
         transplantation (See (3) above). The quantity of encapsulated islets
         will be dispensed by PCT personnel using methods based on [***]. The
         encapsulated islets will be placed in [***] and transported to the
         transplantation locations.

Isolation, processing and encapsulation of the porcine microislet cells will
occur in an [***] in a fully segregated operational space at PCT's Mountain View
facility containing:

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

NOTE: Production will be staged such that a single dose for a human subject
would be prepared [***].

In-process islet and final encapsulated islet product testing provided by PCT
will comprise:

         o        [***]

         o        [***]

         o        [***]

                                      -16-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.



         o        [***]

         o        [***]

In-process islet and final product encapsulated islet testing to be outsourced
will comprise:

         o        [***]

         o        [***]

Additional assays may need to be developed for product characterization in
support of regulatory submissions, clinical trials and/or final product release.
For the latter, such assays will require qualification to a level suitable for
use in Phase I clinical trials. See further details in the Scope of Work Stage 5
below.

Controlled materials storage outside of the CER requires:

         o        [***]

         o        [***]

         o        [***]

         o        [***]

Other services required outside of the CER include:

         o        [***]

         o        [***]


SCOPE OF WORK

INCLUSIONS

PCT shall perform the following services:

     1.  Provision of a qualified [***] containing the following qualified
         equipment:

         a.       [***]

         b.       [***]

         c.       [***]

         d.       [***]

         e.       [***]



                                      -17-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


         f.       [***]

         g.       [***]

     2.  [***] space for performance of QC testing and small parts preparation

     3.  Provision of the following equipment for [***]. Such [***] will have
         been [***]:

         a.       [***]

         b.       [***]

         c.       [***]

     4.  Dedicated use of the above [***].

     5.  Preparation/adaptation of part number specifications for MICROISLET
         materials, reagents and final Products.

     6.  Receive all materials, reagents and products required for the
         Manufacture and testing of the Product and accept them in accordance
         with MICROISLET's specifications and in compliance with MICROISLET's
         instructions.

     7.  Controlled materials GMP warehouse storage including quarantined,
         rejected and released ambient storage and controlled refrigerated and
         frozen storage.

     8.  Routine environmental monitoring and cleaning of the CER area and
         equipment therein according to current PCT practice.

     9.  In-process and final product QC testing as detailed above.

     10. QC line clearance.

     11. Packaging of quality control test samples for sterility and mycoplasma
         testing at an external contract testing site.

     12. Packaging of final product.

     13. Compilation of batch production record.

     14. Compilation of a GMP process qualification protocol and report.

     15. GMP qualification of the current manufacturing process.

     16. Waste disposal services according to current PCT procedures.

     17. Gowning supplies according to current PCT gowning procedures.

     18. Sanitization supplies for materials entering CER.

                                      -18-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


EXCLUSIONS:

The Services do NOT include the following:

     1.  The purchase, delivery and any associated vendor installation cost of
         MICROISLET provided equipment to be located in the [***]. Equipment to
         be provided by MICROISLET comprises:

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

         o        [***]

     2.  Maintenance and/or maintenance contracts for MICROISLET provided
         equipment

     3.  The cost of reagents and materials and outside testing costs

     4.  [***]. These tests will be carried out [***].

     5.  [***].

     6.  Shipping costs for final product and sterility test samples. Such
         costs will be invoiced separately by PCT to MICROISLET

     7.  Stage related travel costs incurred by PCT

     8.  Provision of assay test methods beyond those detailed above

     9.  Process or assay development, qualification or validation activities
         beyond those detailed above

     10. Equipment validation/qualification activities beyond those above

     11. Environmental monitoring or facility cleaning beyond that currently
         executed by PCT

     12. Additional qualification and or validation activities to address
         specific requests received from regulatory agencies following
         submission of regulatory documentation

     13. Receiving QC services beyond the review of MICROISLET provided audited
         vendor documentation and certificates of analysis/conformance

     14. Overall slow accrual or delays in the start/accrual that occur as a
         result of clinical hold or other delays being applied by a regulatory
         authority, clinical site institutional review boards (IRB) or another
         party, and that result in the extension of the manufacturing campaign
         for the clinical trial beyond the projected duration of Stage 4.
         Should an extension of Stage 4 occur, then additional manufacturing
         facility suite operations and other costs will be incurred under a
         Program Amendment Order (PAO)

                                      -19-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


     15. Extension of the manufacturing campaign for the clinical trial beyond
         the projected duration of Stage 4 (e.g. additional patients, dose
         cohorts). Should an extension of Stage 4 occur, then additional
         manufacturing facility suite operations and other costs will be
         incurred under a PAO

ADDITIONAL STEPS

     A CER operations fee of [***] Stage 4 (the clinical trial manufacturing
     campaign) beyond the projected duration stated below for such Stage..

     Process development/validation and assay development/validation services
     can be provided in a separate negotiated package.

     Additional protocol compilation, execution and reporting of
     installation/operational/performance qualifications (IOPQ) for equipment,
     systems and utilities can be provided in a separate negotiated package.

     Regulatory consulting and writing services beyond the scope of Stage 3
     below, including attendance at meetings between regulatory agents and
     client and conversion of the CMC in Stage 3 into other English language
     regulatory submission formats can be provided in a negotiated package, or
     at the standard daily consulting rate

     Additional activities outside of the scope of this program requested by the
     client would be subject to written pre-approval by the client in a formal
     Program Amendment and charged at the standard PCT daily rate of the table
     below plus direct, out-of-pocket costs associated with travel expenses, or
     in a negotiated package.

     PCT STAFF CONSULTING RATES
                         RATE /HOUR          DAILY MAXIMUM
          [***]            [***]                 [***]
          [***]            [***]                 [***]
          [***]            [***]                 [***]


PROJECT STAGES

The project will be comprised of the following stages (NOTE: Due to the nature
of the activities, some stages may occur in parallel):

STAGE 1 - PROJECT IMPLEMENTATION AND TECHNOLOGY TRANSFER
In this stage:

     o    PCT will compile a Master Project File (MPF) for the project

     o    MICROISLET will transfer appropriate documentation in the form of
          SOPs, development/qualification/audit reports and part number
          specifications

     o    PCT will convert and/or write relevant documentation required for
          implementation in the GMP systems for which support is being provided

                                      -20-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


     o    MICROISLET staff will train PCT staff on processing and test methods.
          Such training will initiate at the San Diego MICROISLET facility and
          then relocate to PCT Mountain View facility

     o    PCT will implement appropriate CER, services and utilities for the
          program

Deliverables for this phase shall include acknowledged receipt of relevant
materials, an MPF and technology transfer reports.

ESTIMATED DURATION:        [***] Months

STAGE 2 - PROCESS QUALIFICATION
In this stage under cGMP conditions in an ISO 7 CER at PCT's Mountain View
facility, PCT will qualify the manufacturing process and carry out any required
aseptic fill studies. PCT shall maintain the GMP compliance of the CER,
utilities, systems and equipment during this time and also provide environmental
monitoring, cleaning and QC testing services as detailed above.

It is projected that sufficient pancreata for process qualification activities
will be available at a minimum of every two (2) weeks.

Deliverables for this phase include a final report for the GMP process
qualification.

ESTIMATED DURATION:  [***] Months

STAGE 3 - COMPILATION OF CHEMISTRY MANUFACTURING & CONTROLS SECTION FOR A
REGULATORY SUBMISSION In this stage, PCT will prepare a US FDA Investigational
New Drug (IND) format Chemistry Manufacturing and Controls (CMC) section.
MICROISLET can use this CMC section directly in support of US filings and/or
adapt such information into the format required for EX-US regulatory
submissions.

Conversion of the CMC into other English language regulatory submission formats
can be provided in a negotiated package, or at the standard daily consulting
rate.

Under this Stage, PCT will provide one (1) experienced individual from the
senior management team to attend a one (1) meeting/ or one (1) teleconference
with one (1) regulatory agency. Attendance at additional regulatory meetings
and/or teleconferences can be provided in a negotiated package, or at the
standard daily consulting rate

ESTIMATED DURATION:        [***] Months

STAGE 4 - GMP MANUFACTURE OF ENCAPSULATED ISLET CELLS TO SUPPORT A PHASE I
CLINICAL TRIAL In this stage under cGMP conditions in an [***] at PCT's
facility, and for a period of up to [***] months, PCT will manufacture
encapsulated human microislet cell products to support a Phase I
xenotransplantation clinical trial.

Manufacturing inventories, production schedules and product shipments to
clinical sites will be coordinated with MICROISLET.

Production will be scheduled such that a single dose for a human subject would
be prepared [***] Deliverables for this phase include all data related to the
manufacturing, testing release and storage of the product, and the maintenance
of the corresponding equipment, materials and facility.

                                      -21-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


DURATION: [[***] Months

STAGE 5 - UPON ELECTION BY MICROISLET: DEVELOPMENT AND/OR VALIDATION OF SELECTED
ANALYTICAL TEST AND BIOLOGICAL CHARACTERIZATION METHODS During this stage,
MICROISLET may elect to have PCT develop and or validate selected analytical or
characterization methods related to the testing of porcine islets and
encapsulated porcine islets.

PCT will work with MICROISLET on an individual election basis for such
additional assays that may comprise:

    o  [***]
    o  [***]
    o  [***]
    o  [***]
    o  [***]
    o  [***]
    o  [***]

Deliverables for this phase would include a final report and data package for
each protocol executed.

ESTIMATED DURATION:        [***] months per protocol

COST: The work in Stage 5 will be provided on an elected protocol basis with
price, terms and conditions provided in a proposal for each protocol. Estimated
[***] per protocol + any stage- or process-related out-of-pocket costs incurred
by PCT, including reagents/materials, travel and outside testing costs. Scope
and costs will be determined and mutually agreed upon by the parties by PAOs as
required.


                                      -22-


<Page>
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.

                                                 ATTACHMENT B

                                            PROGRAM AMENDMENT ORDER
                                            -----------------------

=========================================== ======================================== ==================================

(1)      PROJECT TITLE & NUMBER:            (2)      DATE PROJECT STARTED:           (3)      P.A.O. NUMBER:
------------------------------------------- ---------------------------------------- ----------------------------------

(4)      REASON FOR P.A.O.




-----------------------------------------------------------------------------------------------------------------------

(5)      AMENDMENT REQUIRED AND NEW MILESTONES




-----------------------------------------------------------------------------------------------------------------------

(6)      IMPACT ON PRICE, TIME FRAME, RESOURCES:




-----------------------------------------------------------------------------------------------------------------------

(7) AMENDED PAYMENT SCHEDULE (IF REQUIRED):




-----------------------------------------------------------------------------------------------------------------------

Authorization


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

for PCT                                                           for CLIENT
=======================================================================================================================
</TABLE>

                                                     -23-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.

                                  ATTACHMENT C

                                QUALITY AGREEMENT


         Subject to the results of a MICROISLET-directed quality audit of PCT to
be conducted no later than September 15, 2007 and any subsequent amendments
arising there from, this Quality Agreement defines the responsibilities of
Progenitor Cell Therapy LLC (PCT) and MICROISLET for compliance to current good
manufacturing practices (CGMP) and applicable current Good Tissue Practices
(CGTP) for manufacturing, storage and shipping services for the production of
Product for clinical or commercial purposes. PCT is responsible for compliance
to all applicable requirements while the Product is under the direct control of
PCT. MICROISLET is responsible for compliance to all applicable requirements
while the Product is under the direct control of the MICROISLET.

Definitions:
         PCT:                               Progenitor Cell Therapy Company or
                                            its authorized employees

         MICROISLET:                        MICROISLET or its authorized
                                            employees

         PRODUCT SPECIFICATIONS:            The assay methods and specifications
                                            upon which the Product will be
                                            tested and released

         PRODUCT FAILURE:                   The failure of any Product
                                            unit or batch to meet the Product
                                            Specifications and/or any Product
                                            unit or batch produced in a manner
                                            which failed to comply with the
                                            provisions of the Quality Agreement,
                                            cGMP or cGTP.

         Unless otherwise set forth herein, all other capitalized terms used
         herein shall have the meaning given to them in the Services Agreement
         entered into by and between the Parties on or around September 1, 2007
         to which this Quality Agreement is an attachment.

Terms:

1. PCT shall provide contract Manufacturing and quality control testing of
Product as defined in Attachment A.

2. MICROISLET will responsibly ensure that the methods and materials prescribed
in the process will support the use of the Product for the proposed clinical
use.

3. If necessary, applicable process and/or test methods must be successfully
transferred from MICROISLET to PCT and appropriate training documented per PCT
procedures before implementation.

4. PCT will provide QC testing for Product per Attachment A, the results of
which will promptly be communicated to MICROISLET following PCT's quality
assurance review.

5. MICROISLET must accept each Product unit or batch which meets the Product
Specifications. The Parties agree such acceptance will be deemed to occur upon
the Product meeting the Product Specifications.

                                      -24-


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CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


6. [***] will be responsible for the disposal of any Product that is the subject
of Product Failure. [***] is responsible to lead an investigation of the cause
of any Product Failure and to provide [***] with a written report including the
results and conclusions of such investigation. [***] shall comply with all
reasonable requests for data, cooperation, and assistance in the conduct of any
such investigation.

7. PCT and MICROISLET will agree on those reagents and materials to be provided
directly by MICROISLET and those, if any, to be purchased by PCT, and on a
schedule for purchase and for the activities described below:

     o    Materials provided by MICROISLET directly to PCT will be identified as
          approved and accompanied by a Certificate of Compliance (CoC) or
          Certificate of Analysis (CoA) or other document as appropriate. PCT
          will receive such materials according to agreed procedures with
          MICROISLET and will confirm that the material received has a CoC or
          CoA or appropriate documentation.
     o    Materials purchased by MICROISLET and shipped to the MV Facility will
          be held in quarantine until MICROISLET has approved them for release
          and provides PCT with documentation as above.
     o    Materials purchased by PCT will be sampled and/or tested and/or
          inspected according to PCT procedures.
     o    PCT will test and inspect according to PCT procedures unless use of
          MICROISLET specified procedures are mutually agreed upon and provision
          is made for assay transfer and implementation under a Program
          Amendment Order.
     o    PCT will notify MICROISLET as soon as practical, but no later than 5
          days after such test and inspection, if any materials, product or
          packaging do not meet requirements.

8. Any materials purchased by PCT will be from PCT approved manufacturers. If
the materials are provided by MICROISLET, it is MICROISLET's responsibility to
assure that the materials are from approved/qualified manufacturers.

9. Information as to labeling and other packaging will be provided by
MICROISLET.

10. PCT will notify MICROISLET and gain written agreement for any planned
deviations from the agreed upon procedures prior to implementation if determined
by PCT QA that such changes may affect the Product.

11. PCT will notify MICROISLET in writing of any unplanned deviations that
affect the Product as soon as possible. Unplanned deviations will be
investigated according to PCT procedures and documented by PCT, with
notification and a copy of such documentation provided to MICROISLET.

12. PCT will notify MICROISLET in writing of any proposed major changes to
equipment, location and/or changes in material suppliers that affect MICROISLET
as soon as possible in order for MICROISLET to review, assess impact and comment
on changes and to be able to implement changes in a timely manner.

13. MICROISLET will notify PCT in writing of any planned changes to equipment,
materials, process, testing (to the extent performed or to be performed by PCT)
or shipping requirements as soon as possible in order for PCT to review, assess
impact and comment on changes and to be able to implement agreed upon changes in
a timely manner.

                                      -25-


<Page>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


14. PCT will capture any agreed upon changes to the Quality Agreement and
documents related to PCT's provision of services through a Program Amendment
Order and where applicable PCT's change control system.

15. PCT is responsible for ensuring that equipment is properly cleaned/sanitized
and documented in compliance with PCT's cleaning/sanitizing procedures.

16. PCT will conduct testing for release of product according to Attachment A.

17. MICROISLET is responsible for stability testing; MICROISLET will advise PCT
regarding the storage and shipment of stability samples.

18. Written authorization to ship the Product to MICROISLET or another
MICROISLET designated location will be provided by MICROISLET to PCT.

19. A copy of the packaging record will be provided to MICROISLET as soon as
practical after shipment.

20. MICROISLET will inform PCT as soon as possible of any customer complaints or
any adverse event. PCT will perform any internal investigations as appropriate
and assist MICROISLET with a response to the customer or appropriate agency
unless otherwise requested.

21. Annual product review will be the responsibility of MICROISLET unless
otherwise requested.

22. MICROISLET may conduct a compliance audit of PCT related to CGMP/GTP systems
and those areas impacting on Product for MICROISLET once a year and with a
minimum thirty (30) calendar day written notification period.

23. PCT will accommodate any Regulatory Agency inspection required or specified
by MICROISLET and shall notify MICROISLET of such inspection so that a
representative of MICROISLET may be present at such inspection if so desired.
PCT shall provide MICROISLET with a summary of any deficiencies cited by the
inspecting Regulatory Agency as result of such inspection which are directly or
reasonably related to the Services and copies of any relevant excerpts of any
related communications between PCT and the Regulatory Agency with respect to
such deficiencies.

24. Any changes to the Quality Agreement and to product specifications or
product testing (to the extent performed or to be performed by PCT) must be
mutually agreed in the form of a Program Amendment that is approved by
appropriate management including QA from PCT and MICROISLET.

25. Day-to-day QA activities and communications between PCT and MICROISLET shall
be handled by their respective personnel. PCT and MICROISLET shall direct all
other communications to the Senior QA Communication Contacts listed below:

[SIGNATURE PAGE TO FOLLOW]

                                      -26-


<Page>

CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


------------------------- --------------------------------- --------------------
                                           PCT                    MICROISLET
------------------------- --------------------------------- --------------------

                           Marie A. DeVito
QUALITY ASSURANCE          Sr. Director QA/QC
 (SENIOR CONTACT)          Tel: (201) 883-5311
                           mdevito@progenitorcell.net

                           Robert Preti, Ph.D
QUALITY ASSURANCE          President & CSO
(ALTERNATE SENIOR          Tel:  (201) 883-5316
CONTACT)                   rpreti@progenitorcell.net
------------------------- --------------------------------- --------------------




____________________________                         Date: _____________________
Robert A. Preti
Progenitor Cell Therapy LLC, President & Chief Scientific Officer




____________________________                         Date: _____________________
Marie DeVito
Progenitor Cell Therapy LLC, Senior Director of Quality Assurance and Quality
Control




____________________________                         Date: _____________________
Michael J. Andrews
MICROISLET Inc.
MICROISLET Inc., CEO




____________________________                         Date: _____________________
Michael J. Andrews
MICROISLET Inc.
MICROISLET Inc., CEO


                                      -27-


<Page>



CONFIDENTIAL TREATMENT REQUESTED BY MICROISLET, INC.


                            CONFIDENTIALITY AGREEMENT
                            -------------------------


       THIS AGREEMENT is made between MicroIslet, Inc., 6370 Nancy Ridge Drive,
       Suite 112, San Diego, California, 92121 ("MicroIslet") and Progenitor
       Cell Therapy, LLC (the "Recipient).

1.     DISCLOSURE. Microislet may disclose or may have disclosed to the
       Recipient, or Recipient may be given access to, certain proprietary,
       confidential information, materials, know-how, samples or other data
       (technical and non-technical), both written and unwritten, regarding the
       proprietary technology or business plan of MicroIslet (collectively, the
       "MicroIslet Information"), to the Recipient.

2.     CONFIDENTIALITY. In consideration of such disclosure, the Recipient shall
       hold all of the information received from MicroIslet in confidence and
       shall refrain from using the same or disclosing any part thereof to any
       third party. In the regard and as applicable, the Recipient shall limit
       dissemination of the access to Information received from MicroIslet only
       to such of its directors, officers, employees, subsidiaries, affiliates
       and/or other authorized representatives as are directly concerned with
       such information and who have signed appropriate secrecy agreements with
       the Recipient in connection with their employment or before receipt of
       the Information. The recipient shall advise such persons of the
       confidential nature of the Information, and shall use its best efforts to
       prevent disclosure of the same in violation of this Agreement. For
       purposes of this Agreement, Information is defined to include, but is not
       limited to, notes, records, reports, sketches, plans, photographs
       (including negatives), memoranda or other documents, and all
       developments, concepts, studies, improvements and compilations (whether
       patentable or not) developed by MicroIslet.

3.     RETURN OF MATERIALS. Upon completion of the discussion hereby, or upon
       the earlier request of MicroIslet, Recipient shall immediately return to
       MicroIslet any Information in written or other tangible form, and shall
       not retain any copies or summaries of such Information unless expressly
       approved in writing by MicroIslet.

4.     EXCEPTIONS TO RESTRICTIONS. The confidentiality and non-use obligations
       shall not apply to Information which:

       (a)    is in or hereafter enters the public domain through no fault of
              the Recipient;

       (b)    is obtained from a third party having the legal rights to use and
              disclose the same;

       (c)    is in the possession of the Recipient prior to receipt from
              MicroIslet, as evidenced by written records predating such
              receipt; or

       (d)    is independently developed by the Recipient as evidenced by
              written record proving such independence.

       Specific information shall not be deemed to be within the exceptions
       merely because it is incorporated within more general Information within
       the exceptions. Further, any combination of Information shall not be
       deemed to be within the exceptions merely because individual items are
       within the exceptions.

5.     NO GRANT OF RIGHTS. No rights or license to any patent or other
       intellectual property right is granted to either party by this Agreement.

6.     CONFIDENTIALITY. The confidentiality and non-use obligations of the
       Recipient hereunder shall continue in force for three years, and shall
       survive the term or termination of this Agreement.




<Page>

7.     GOVERNING LAW. This Agreement shall be governed by and construed in
       accordance with the laws of the State of California, U.S.A. and the
       parties hereby submit to the jurisdiction of the California courts, both
       state and federal.

8.     ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
       the parties with respect to the subject matter hereof and supersedes all
       prior agreements and understandings between the parties (whether written
       or oral) relating thereto. No modification shall be effective unless made
       in writing and signed by a duly authorized representative of each party

9.     INJUNCTIVE RELIEF. The Recipient recognizes that MicroIslet's Information
       is the sole property of MicroIslet, shall remain solely MicroIslet's and
       constitutes valuable trade secrets of MicroIslet. The Recipient
       acknowledges that failure to comply with the terms of this Agreement
       would cause irreparable damage. Therefore, the Recipient agrees that in
       addition to any other remedies at law or in equity available for breach
       of this Agreement, MicroIslet may seek specific performance or injunctive
       relief to prevent such damage or further damage regarding its
       Information.

       IN WITNESS WHEREOF, the parties have executed this Agreement as of the
       dates set forth below.


<TABLE>
<S>                                          <C>
MICROISLET, INC.                             PROGENITOR CELL THERAPY, LLC

By:  Kevin A. Hainley                        By: /s/ George S. Goldberger
     -------------------------------             -------------------------------
     Title: Interim CFO                          Title: CFO
     Signature: /s/ Kevin A. Hainley             Signature: /s/ George S. Goldberger
     Date: 09/29/2006                            Date: 10/06/2006
</TABLE>