Document:

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EXHIBIT 10.6

                      RESEARCH FUNDING AND OPTION AGREEMENT

                                 BY AND BETWEEN

                         THE SCRIPPS RESEARCH INSTITUTE
                             A CALIFORNIA NONPROFIT
                           PUBLIC BENEFIT CORPORATION

                                       AND

                                MICROISLET, INC.,

                              A NEVADA CORPORATION

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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                                TABLE OF CONTENTS

1.       DEFINITIONS........................................................-1-
         1.1      AFFILIATE.................................................-1-
         1.2      CONFIDENTIAL INFORMATION..................................-2-
         1.3      FIELD.....................................................-2-
         1.4      JOINTLY DEVELOPED TECHNOLOGY..............................-2-
         1.5      LICENSED PRODUCT..........................................-2-
         1.6      PRINCIPAL INVESTIGATOR....................................-2-
         1.7      PROPRIETARY PROPERTY......................................-2-
         1.8      RESEARCH PROGRAM..........................................-3-
         1.9      SCRIPPS PATENT RIGHTS.....................................-3-
         1.10     SCRIPPS TECHNOLOGY........................................-3-

2.       CONDUCT OF RESEARCH PROGRAM........................................-3-
         2.1      CONDUCT OF RESEARCH PROGRAM...............................-3-
         2.2      SUPERVISION OF RESEARCH PROGRAM...........................-3-
         2.3      REPORTS...................................................-3-
         2.4      CONTRIBUTIONS OF PARTIES TO RESEARCH PROGRAM..............-4-
         2.5      TRANSFER OF MATERIALS.....................................-4-

3.       OPTION FOR EXCLUSIVE LICENSE.......................................-5-
         3.1      GRANT OF OPTION...........................................-5-
         3.2      DISCLOSURE OF SCRIPPS TECHNOLOGY..........................-5-
         3.3      DISCLOSURE OF JOINTLY DEVELOPED TECHNOLOGY................-5-
         3.4      OPTION PERIOD.............................................-6-
         3.5      EXERCISE OF OPTION........................................-6-
         3.6      RESERVATION OF RIGHTS.....................................-6-

4.       WARRANTIES.........................................................-6-
         4.1      WARRANTY OF TITLE; NO OTHER WARRANTIES....................-6-
         4.2      NO OTHER WARRANTIES.......................................-6-

5.       INTERESTS IN INTELLECTUAL PROPERTY.................................-7-
         5.1      TITLE.....................................................-7-
         5.2      GOVERNMENTAL INTEREST.....................................-7-

6.       CONFIDENTIALITY AND PUBLICATION....................................-7-
         6.1      CONFIDENTIAL INFORMATION..................................-7-
         6.2      PUBLICATIONS..............................................-8-
         6.3      PUBLICITY.................................................-8-

7.       TERM AND TERMINATION...............................................-8-
         7.1      TERM......................................................-8-
         7.2      TERMINATION BY MUTUAL AGREEMENT...........................-8-

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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         7.3      TERMINATION UPON DEFAULT..................................-8-
         7.4      TERMINATION UPON INSOLVENCY...............................-9-
         7.5      EFFECT OF EXPIRATION OR TERMINATION.......................-9-
                  7.5.1  TERMINATION UPON DEFAULT OF OPTIONEE...............-9-
                  7.5.2  EXPIRATION OR TERMINATION UPON DEFAULT OF SCRIPPS..-9-

8.       ASSIGNMENT; SUCCESSORS.............................................-9-
         8.1      ASSIGNMENT................................................-9-
         8.2      BINDING UPON SUCCESSORS AND ASSIGNS......................-10-

9.       GENERAL PROVISIONS................................................-10-
         9.1       INDEPENDENT CONTRACTORS.................................-10-
         9.2       ARBITRATION.............................................-10-
                  9.2.1    LOCATION........................................-10-
                  9.2.2    SELECTION OF ARBITRATORS........................-10-
                  9.2.3    DISCOVERY.......................................-10-
                  9.2.4    CASE MANAGEMENT.................................-11-
                  9.2.5    REMEDIES........................................-11-
                  9.2.6    EXPENSES........................................-11-
                  9.2.7    CONFIDENTIALITY.................................-11-
         9.3       ENTIRE AGREEMENT; MODIFICATION..........................-11-
         9.4       CALIFORNIA LAW..........................................-12-
         9.5       HEADINGS................................................-12-
         9.6       SEVERABILITY............................................-12-
         9.7       NO WAIVER...............................................-12-
         9.8       ATTORNEYS' FEES.........................................-12-
         9.9      NOTICES..................................................-12-
         9.10     COMPLIANCE WITH U.S. LAWS................................-13-

EXHIBIT A

         RESEARCH PROGRAM..................................................-14-

EXHIBIT B

         BUDGET............................................................-15-

EXHIBIT C

         FORM OF LICENSE...................................................-16-

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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                      RESEARCH FUNDING AND OPTION AGREEMENT

                  This Agreement is entered into this 20th day of February,
2003, by and between THE SCRIPPS RESEARCH INSTITUTE, 10550 North Torrey Pines
Road, La Jolla, California 92037 ("Scripps"), a California nonprofit public
benefit corporation, and MICROISLET, INC. ("Optionee"), a Nevada corporation
located at 6370 Nancy Ridge Drive, Suite 112, San Diego, California 92121, with
respect to the facts set forth below.

                                    RECITALS
                                    --------

         A. Scripps is engaged in scientific biomedical and biochemical
research, including research relating to transplantation, as more particularly
described herein.

         B. Optionee is engaged in research and development of transplantation
therapies for patients with diabetes.

         C. Optionee desires to provide certain funding as part of the Scripps
research activities described above.

         D. Scripps has the exclusive right to grant a license in and to any
technology developed pursuant to the research program described herein, subject
to any non-exclusive rights of the U.S. Government, resulting from the receipt
by Scripps of U.S. Government funding, to use such technology for its own
purposes.

         E. Scripps is willing to grant to Optionee an option to acquire an
exclusive, worldwide right and license to use, enhance and develop technology
arising from the Research Program and develop, market and sell products in the
field described below, all as is more particularly described herein.

                                    AGREEMENT
                                    ---------

         NOW, THEREFORE, in consideration of the mutual covenants and conditions
outlined herein, Scripps and Optionee hereby agree as follows:

         1. DEFINITIONS.

                  1.1 AFFILIATE. The term "Affiliate" shall mean any entity
which directly or indirectly controls, is controlled by or is under common
control with Licensee. The term "control" as used herein means the possession of
the power to direct or cause the direction of the management and the policies of
an entity, whether through the ownership of a majority of the outstanding voting
securities or by contract or otherwise.

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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                  1.2 CONFIDENTIAL INFORMATION. The term "Confidential
Information" shall mean any and all proprietary information of Scripps or
Optionee which may be exchanged between the parties at any time and from time to
time during the term hereof. The fact that a party may have marked or identified
as confidential or proprietary any specific information shall be indicative that
such party believes such information to be confidential or proprietary, but the
failure to so mark information shall not conclusively determine that such
information was or was not considered confidential information by such party.
Information shall not be considered confidential to the extent that it:

                           a. Is publicly disclosed through no fault of any
party hereto, either before or after it becomes known to the receiving party; or

                           b. Was known to the receiving party prior to the date
of this Agreement, which knowledge was acquired independently and not from the
other party hereto (including such party's employees); or

                           c. Is subsequently disclosed to the receiving party
in good faith by a third party who has a right to make such disclosure; or

                           d. Has been published by a third party as a matter of
right.

                  1.3 FIELD. The term "Field" shall mean islet or insulin
producing cell transplantation.

                  1.4 JOINTLY DEVELOPED TECHNOLOGY. The term "Jointly Developed
Technology" shall mean any information, process, technology and materials
included within the scope of the Research Program which are developed by both
Scripps and Optionee during the term of this Agreement as a result of the
Research Program and which, under principles arising under the patent laws of
the United States of America, would be found jointly owned by both Scripps and
Optionee thereunder.

                  1.5 LICENSED PRODUCT. The term "Licensed Product" shall mean
any human therapeutic product which cannot be developed, manufactured, used or
sold without utilizing Scripps Patent Rights, or any Scripps Technology not
otherwise includable within Scripps Patent Rights or Jointly Developed
Technology.

                  1.6 PRINCIPAL INVESTIGATOR. The term "Principal Investigator"
shall mean the person identified in Section 2.2 below, together with such
replacement persons selected in accordance with the provisions thereof.

                  1.7 PROPRIETARY PROPERTY. The term "Proprietary Property"
shall mean, with respect to any party hereto, any and all technology, now
existing or hereafter arising, in which such party shall have a proprietary
interest, including without limitation, any idea, data, compound, molecule, cell
line, material, know-how, technique, method, process, use, composition, skill,
Confidential Information, trade secret or configuration of any kind, whether or
not any such information would be enforceable as a trade secret, the copying of

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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which would be enjoined or restrained by a court as constituting copyright
infringement or unfair competition or would be eligible for protection under the
patent laws of the United States or elsewhere.

                  1.8 RESEARCH PROGRAM. The term "Research Program" shall mean
the research program to be undertaken by Scripps under the direction and control
of the Principal Investigator set forth in Section 2.2 hereof.

                  1.9 SCRIPPS PATENT RIGHTS. The term "Scripps Patent Rights"
shall mean the rights arising out of or resulting from (i) any and all U.S. and
foreign patent applications directed to Scripps Technology, (ii) the patents
proceeding from such applications, and (iii) divisionals, continuations,
reissues, reexaminations, and extensions of any patent or application set forth
in (i)-(ii), and (iv) all claims of continuations-in-part that are entitled to
the benefit of the priority date of any application of (i)-(iii), so long as
said patents have not been held invalid and/or unenforceable by a court of
competent jurisdiction from which there is no appeal or, if appealable, from
which no appeal has been taken.

                  1.10 SCRIPPS TECHNOLOGY. The term "Scripps Technology" shall
mean any Proprietary Property of Scripps developed, in whole or in part, in the
laboratory of Dr. Dan Salomon in the performance of the Research Program during
the term of this Agreement, including any intellectual property within the scope
of the Research Program developed by any employee of Scripps during the term of
this Agreement while such employee is rendering services to Optionee as a
consultant or otherwise.

         2. CONDUCT OF RESEARCH PROGRAM.

                  2.1 CONDUCT OF RESEARCH PROGRAM. Scripps hereby agrees to
conduct the Research Program as expressly set forth on Exhibit A attached
hereto, as amended from time to time in accordance with its terms, and subject
to the provisions of this Agreement.

                  2.2 SUPERVISION OF RESEARCH PROGRAM. Scripps agrees that the
Research Program at Scripps shall be conducted by or under the direct
supervision of the following Principal Investigator: Dr. Dan Salomon. In the
event that the Principal Investigator leaves Scripps, or terminates his
involvement in the Research Program, Scripps shall use its best efforts to find
a replacement Principal Investigator acceptable to Optionee, which acceptance
shall not be unreasonably withheld. In the event that Scripps shall fail to
appoint a replacement Principal Investigator reasonably acceptable to Optionee,
Optionee shall have a right to terminate this Agreement upon delivery to Scripps
of written notice of intent to terminate pursuant to this Section 2.2, which
notice must be delivered to Scripps not less than 30 days nor more than 90 days
after delivery by Scripps to Optionee of the name of the replacement Principal
Investigator.

         2.3 REPORTS.

                           a. Scripps agrees that within sixty (60) days
following the last day of each calendar year during the term of this Agreement,
Scripps shall furnish

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                        3

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Optionee with a written report summarizing the results of the research included
within the scope of the Research Program during the immediately preceding
calendar year conducted by Scripps, including but not limited to all data,
conclusions, results, observations and a detailed description of all procedures.

                           b. Optionee agrees that within sixty (60) days
following the last day of each calendar year during the term of this Agreement,
Optionee shall furnish Scripps with a written report summarizing the results of
the research and development included within the scope of the Research Program
during the immediately preceding calendar year which Optionee believes
constitutes Jointly Developed Technology, including but not limited to all data,
conclusions, results, observations and a detailed description of all procedures.

                           c. Scripps agrees that within twenty (20) days
following the last day of each calendar quarter during the term of this
Agreement, Scripps shall furnish Optionee with a written report summarizing the
results of the research included within the scope of the Research Program during
the immediately preceding calendar quarter conducted by Scripps, including but
not limited to all data, conclusions, results, observations and a detailed
description of all procedures. The purpose of this report will be to keep the
Optionee informed of any progress. This report will not be used for the purposes
described in Section 3 below.

                           d. All such information submitted to Optionee by
Scripps, and all such information submitted to Scripps by Optionee, as a result
of the Research Program under this Agreement is deemed Confidential Information
of the submitting party, and shall be kept confidential by the other party, and
shall be used by Optionee only for the purpose of evaluating whether or not to
exercise an option to obtain a license pursuant to Section 3 hereof, as and when
such option is exercisable in accordance with the terms hereof. The parties
shall not, during the term or after the termination hereof, use or disclose any
of the Confidential Information, unless and until (i) permitted to do so
pursuant to the terms of any license agreement entered into by Optionee after
exercise of option for such technology or (ii) such information no longer comes
within the definition of "Confidential Information" hereunder and otherwise
becomes available as public information.

                  2.4 CONTRIBUTIONS OF PARTIES TO RESEARCH PROGRAM.
Contributions in the form of financial support, equipment, personnel, technology
and other necessary components for the conduct of the Research Program shall be
made by the parties in accordance with the terms set forth on Exhibit B attached
to this Agreement.

                  2.5 TRANSFER OF MATERIALS. Optionee will, from time to time
provide cells and other materials to Scripps to be used in the Research Program.
The parties agree that these materials remain the property of Optionee and will
not be used by Scripps for any purpose not expressly agreed to by Optionee. Any
unused cells or materials provided by Optionee will be returned upon request.
The parties further agree that the condition, treatment, processing, and state
of cells and other materials provided to Scripps by Optionee are at the
discretion and responsibility of Optionee and that no Scripps Technology is
contained in these materials.

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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         3. OPTION FOR EXCLUSIVE LICENSE.

                  3.1 GRANT OF OPTION.

                           a. It is the intention of the parties hereto that the
Proprietary Property which is the subject of the option described in this
Section 3 is available to Optionee, under the specific terms hereof, on an
application-by-application basis, where each application is with respect to a
specific field. It is the further intention of the parties hereto that Optionee
may elect to exercise its option from time to time and at multiple times during
the term hereof, as and when Scripps makes the disclosure of each application of
Proprietary Property (whether Scripps Technology, Scripps Patent Rights covering
Scripps Technology, or Scripps' rights in Jointly Developed Technology). The
statement of general intention described in this subparagraph is qualified in
its entirety by the specific provisions of this Section 3.

                           b. Subject to the terms of this Agreement, Scripps
hereby grants to Optionee an exclusive option to acquire an exclusive worldwide
license to make, have made, import, offer for sale, sell or use Licensed
Products, with exclusive rights of sublicense, in the Field. Each such license
shall be to a specific application of Scripps Technology, Scripps Patent Rights
covering Scripps Technology, or Scripps' rights in Jointly Developed Technology,
as more particularly described in the disclosure (Sections 3.2 or 3.3). Such
option shall be for the period (Section 3.4) and exercised as (Section 3.5) more
particularly described below.

                  3.2 DISCLOSURE OF SCRIPPS TECHNOLOGY. As soon as reasonably
possible, either upon conception or reduction to practice, as the case may be,
of each and every application of Scripps Technology, Scripps shall disclose the
same in writing to Optionee. Such disclosure shall contain sufficient detail to
enable Optionee to evaluate the advisability of exercising the option granted
hereunder with respect to such application. All such disclosures shall be
maintained in confidence by Optionee.

                  3.3 DISCLOSURE OF JOINTLY DEVELOPED TECHNOLOGY. As soon as
reasonably feasible, either upon conception or reduction to practice, as the
case may be, of each and every application of Jointly Developed Technology,
Optionee shall disclose the same in writing to Scripps. Such disclosure shall
contain sufficient detail to enable Scripps to evaluate whether such technology
is, in fact, within the definition of Jointly Developed Technology. If Scripps,
in the exercise of its good faith discretion, acknowledges that all or some of
such technology as so described by Optionee falls within the definition of
Jointly Developed Technology, then Scripps shall deliver to Optionee a written
notice describing the Jointly Developed Technology and Scripps' intent to
license the same to Optionee if Optionee exercises its option.

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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                  3.4 OPTION PERIOD. Optionee shall have a period of ninety (90)
days from receipt of the disclosure from Scripps described in Section 3.2 above
or from the notice from Scripps described in Section 3.3 within which to
exercise its option to obtain a license in the Field to a particular application
of Scripps Technology or to Scripps' rights to a particular application of
Jointly Developed Technology pursuant to Section 3.1.

                  3.5 EXERCISE OF OPTION. Optionee shall exercise its option to
obtain a license hereunder by delivering to Scripps a written notice within the
option period which specifies the particular application of Scripps Technology
and related Scripps Patent Rights or application of Jointly Developed Technology
for which the option is being exercised. Optionee and Scripps shall have a
period of thirty (30) days from the date of exercise of option by Optionee
within which to agree upon the initial license fee, royalty rate and commercial
development obligations, all as is more particularly set forth in the form of
License Agreement attached hereto as Exhibit C. The specific application of
Scripps Technology and related Scripps Patent Rights, if any, or specific
application of Jointly Developed Technology which is the subject of such License
Agreement will be as set forth in the notice delivered by Scripps and described
in Section 3.2 above or Section 3.3, respectively. The "Field" in such License
Agreement shall be no broader than the Field defined herein.

                  3.6 RESERVATION OF RIGHTS. Scripps reserves the right to use
any Scripps Technology or Jointly Developed Technology that may be subject to an
option pursuant to this Agreement or covered by a license granted hereunder
solely for Scripps' own educational and research purposes and the educational
and research purposes of any other nonprofit organization, without Scripps or
such other nonprofit organization being obligated to pay Optionee any royalties
or other compensation related thereto.

         4. WARRANTIES.

                  4.1 WARRANTY OF TITLE; NO OTHER WARRANTIES. Scripps hereby
warrants and represents that it has the full right and power to enter into this
Agreement.

                  4.2 NO OTHER WARRANTIES. SCRIPPS MAKES NO WARRANTIES
CONCERNING THE RESEARCH PROGRAM OR ANY SCRIPPS TECHNOLOGY, SCRIPPS PATENT RIGHTS
OR JOINTLY DEVELOPED TECHNOLOGY WHICH MAY BE SUBJECT TO THIS AGREEMENT. WITHOUT
LIMITING THE FOREGOING, SCRIPPS DOES NOT REPRESENT OR WARRANT THAT IT WILL
SUCCESSFULLY COMPLETE THE RESEARCH PROGRAM OR THAT, IF COMPLETED, THE RESEARCH
PROGRAM WILL RESULT IN SCRIPPS TECHNOLOGY WHICH WILL BE SUBJECT TO AN OPTION
HEREUNDER OR WHICH OPTIONEE WILL DESIRE TO LICENSE. SCRIPPS MAKES NO EXPRESS OR
IMPLIED WARRANTY, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, AS TO ANY LICENSED PRODUCT. SCRIPPS

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF ANY SCRIPPS
PATENT RIGHTS OR THAT ANY LICENSED PRODUCT WILL BE FREE FROM ANY INFRINGEMENT OF
PATENTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING
SCRIPPS PATENT RIGHTS.

         5. INTERESTS IN INTELLECTUAL PROPERTY.

                  5.1 TITLE.

                           a. Scripps shall retain sole ownership and title to
Scripps Technology and Scripps Patent Rights. Scripps shall, in the good faith
exercise of its discretion, undertake reasonable efforts to preserve and
maintain its ownership and title as Scripps deems appropriate. Ownership of and
title to Jointly Developed Technology shall be vested jointly in Scripps and
Optionee, with each owning an undivided one-half interest therein.

                           b. In the event Optionee does not exercise its option
hereunder to obtain an exclusive license with respect to Scripps' rights in and
to any specific application of Jointly Developed Technology, Optionee hereby
assigns to Scripps all of Optionee's right, title and interest in and to such
Jointly Developed Technology, and Optionee shall have no further rights with
respect thereto, other than a right to receive from Scripps fifty percent (50%)
of the net royalty income received by Scripps with respect to such application,
as and when received. As used herein, "net royalty income" shall mean the gross
royalties and other license fees received under any such license agreement, less
(i) all Scripps out-of-pocket expenses incurred in connection with the licensing
of such Jointly Developed Technology (including without limitation fees of
accountants, attorneys and other consultants engaged in connection with such
licensing) and (ii) an amount equal to fifteen percent (15%) of such gross
royalties and other license fees as an administrative fee to compensate Scripps
for managing such licensing.

                  5.2 GOVERNMENTAL INTEREST. Optionee and Scripps acknowledge
that Scripps has received and expects to continue to receive funding from the
United States Government in support of Scripps' research activities. Optionee
acknowledges and agrees that its rights and obligations pursuant to this
Agreement with respect to Scripps Technology and Scripps Patent Rights, and to
Scripps' rights to Jointly Developed Technology, as applicable, shall be subject
to Scripps' obligations and the rights of the United States Government, if any,
which arise or result from Scripps' receipt of research support from the United
States Government.

         6. CONFIDENTIALITY AND PUBLICATION.

                  6.1 CONFIDENTIAL INFORMATION. The parties agree that during
the term of and any subsequent extension of this Agreement and for a period of
five (5) years after it

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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terminates or for as long as any Confidential Information not otherwise
includable within Scripps Patent Rights is being utilized within a Licensed
Product, whichever is longer, a party receiving Confidential Information of
another party will not use or intentionally disclose such Confidential
Information to any third party without the prior written consent of the
disclosing party.

                  6.2 PUBLICATIONS. Optionee acknowledges that it is the general
policy of Scripps to encourage publication of research results in technical or
scientific journals; and Optionee agrees that Scripps shall have a right to
publish in accordance with its general policy. Prior to such publication,
Scripps shall submit to Optionee copies of proposed publications which contain
subject matter relating to Scripps Technology or Jointly Developed Technology
and afford Optionee a period of thirty (30) days to review the publication.
Scripps will include in the publication, disclosure of Optionee's funding of and
involvement in the Research Program. Upon written request by Optionee prior to
the expiration of such thirty (30) day period and provided that Optionee shall
have exercised its option to one or more applications included within the
subject matter of such publication, Scripps shall delay any such publication for
up to a maximum of sixty (60) days from the date of such request to allow for
the preparation and filing of a patent application.

                  6.3 PUBLICITY. Except as otherwise provided herein or required
by law, no party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, or stockholders'
reports, or otherwise, relating to this Agreement or to any license granted
hereunder, or to the performance thereunder, without the prior written approval
of the other parties, which approval shall not be unreasonably withheld.

         7. TERM AND TERMINATION.

                  7.1 TERM. Unless terminated sooner, the initial term of this
Agreement shall commence on the date set forth above and shall continue for a
period of two (2) years.

                  7.2 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be
terminated at any time upon the mutual written agreement of the parties. In the
absence of an agreement to the contrary, no such termination shall have the
effect of relieving Optionee of its monetary obligations to fund the Research
Program which shall have accrued up and to the date of such termination.

                  7.3 TERMINATION UPON DEFAULT. Any one or more of the following
events shall constitute an event of default hereunder: (i) the failure of a
party to pay any amounts when due hereunder and the expiration of thirty (30)
days after notice of this default; and (ii) the failure of a party to perform
any obligation required of it to be performed hereunder, and the failure to cure
within sixty (60) days after receipt of notice from the other party specifying
in reasonable detail the nature of such default. Upon the occurrence of an event
of default, the non-defaulting party may deliver to the defaulting party written
notice of intent to terminate, such termination to be effective upon the date
set forth in such notice.

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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Such termination rights shall be in addition to and not in substitution for any
other remedies that may be available to the non-defaulting party serving such
notice against the defaulting party. Termination pursuant to this Section 7.3
shall not relieve the defaulting party of liability and damages to
non-defaulting party for breach of this Agreement. Waiver by any party of a
single default or a succession of defaults shall not deprive such party of any
right to terminate this Agreement arising by reason of any subsequent default.

                  7.4 TERMINATION UPON INSOLVENCY. This Agreement may be
terminated as to any party ("Insolvent Party") by another party giving written
notice of termination to the Insolvent Party upon the filing of bankruptcy or
bankruptcy of the Insolvent Party or the appointment of a receiver of any of the
Insolvent Party's assets, or the making by the Insolvent Party of any assignment
for the benefit of creditors, or the institution of any proceedings against the
Insolvent Party under any bankruptcy law. Termination shall be effective upon
the date specified in this notice.

                  7.5 EFFECT OF EXPIRATION OR TERMINATION.

                           7.5.1 TERMINATION UPON DEFAULT OF OPTIONEE. Upon the
termination of this Agreement by reason of a default by Optionee, neither party
shall have any further rights or obligations with respect to this Agreement,
other than the obligation of Optionee to make any and all final payments accrued
prior to the date of termination and the obligation of the parties to make all
reports required hereunder. Upon such termination of this Agreement, the parties
shall continue to abide by their non-disclosure obligations as described in
Section 6.1 and each party hereto shall fulfill any other obligations incurred
prior to such termination. Any such termination of this Agreement shall not
constitute the termination of any license or any other agreements between the
parties which are then in effect except as expressly provided therein.

                           7.5.2 EXPIRATION OR TERMINATION UPON DEFAULT OF
SCRIPPS. Upon the expiration of this Agreement at its regularly scheduled
expiration date, or upon a termination of this Agreement on account of a default
by Scripps, then Scripps shall make the disclosures required by Section 3.2 for
Scripps Technology conceived or reduced to practice up to the date of said
expiration or termination; and Optionee shall have the right to exercise its
option with respect to said Scripps Technology in accordance with the schedule
and procedures specified in Sections 3.4 and 3.5 above. Additionally, each party
shall perform all other obligations up to the date of said expiration or
termination; and the parties shall continue to abide by their non-disclosure
obligations described in Section 6.1; and any previously existing license
agreements or other agreements between the parties shall continue in effect.

         8. ASSIGNMENT; SUCCESSORS.

                  8.1 ASSIGNMENT. Any and all assignments of this Agreement or
any rights granted hereunder by either party to this Agreement are void except
(i) to an Affiliate of Optionee or Scripps or (ii) as expressly permitted
hereunder, without the prior written consent of the other party.

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

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                  8.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to the
limitations on assignment set forth herein, this Agreement shall be binding upon
and inure to the benefit of any successors in interest and assigns of Scripps
and Optionee. Any such successor to or assignee of a party's interest shall
expressly assume in writing the performance of all the terms and conditions of
this Agreement to be performed by such party.

         9. GENERAL PROVISIONS.

                  9.1 INDEPENDENT CONTRACTORS. The relationship between Scripps
and Optionee is that of independent contractors. Scripps and Optionee are not
joint venturers, partners, principal and agent, master and servant, employer or
employee, and have no other relationship other than independent contracting
parties. Scripps and Optionee shall have no power to bind or obligate each other
in any manner, other than as is expressly set forth in this Agreement.

                  9.2 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), and the procedures set forth below. In the
event of any inconsistency between the Rules of AAA and the procedures set forth
below, the procedures set forth below shall control. Judgment upon the award
rendered by the arbitrators may be enforced in any court having jurisdiction
thereof.

                           9.2.1 LOCATION. The location of the arbitration shall
be in the County of San Diego, State of California.

                           9.2.2 SELECTION OF ARBITRATORS. The arbitration shall
be conducted by a panel of three neutral arbitrators who are independent and
disinterested with respect to the parties, this Agreement, and the outcome of
the arbitration. Each party shall appoint one neutral arbitrator, and these two
arbitrators so selected by the parties shall then select the third arbitrator.
If one party has given written notice to the other party as to the identity of
the arbitrator appointed by the party, and the party thereafter makes a written
demand on the other party to appoint its designated arbitrator within the next
ten days, and the other party fails to appoint its designated arbitrator within
ten days after receiving said written demand, then the arbitrator who has
already been designated shall appoint the other two arbitrators.

                           9.2.3 DISCOVERY. Unless the parties mutually agree in
writing to some additional and specific pre-hearing discovery, the only
pre-hearing discovery shall be (a) reasonably limited production of relevant and
non-privileged documents, and (b) the identification of witnesses to be called
at the hearing, which identification shall give the witness's name, general
qualifications and position, and a brief statement as to the general scope of
the testimony to be given by the witness. The arbitrators shall decide any
disputes

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       10

<PAGE>

and shall control the process concerning these pre-hearing discovery matters.
Pursuant to the Rules of AAA, the parties may subpoena witnesses and documents
for presentation at the hearing.

                           9.2.4 CASE MANAGEMENT. Prompt resolution of any
dispute is important to both parties; and the parties agree that the arbitration
of any dispute shall be conducted expeditiously. The arbitrators are instructed
and directed to assume case management initiative and control over the
arbitration process (including scheduling of events, pre-hearing discovery and
activities, and the conduct of the hearing), in order to complete the
arbitration as expeditiously as is reasonably practical for obtaining a just
resolution of the dispute.

                           9.2.5 REMEDIES. The arbitrators may grant any legal
or equitable remedy or relief that the arbitrators deem just and equitable, to
the same extent that remedies or relief could be granted by a state or federal
court, provided however, that no punitive damages may be awarded. No court
action may be maintained seeking punitive damages. The decision of any two of
the three arbitrators appointed shall be binding upon the parties.

                           9.2.6 EXPENSES. The expenses of the arbitration,
including the arbitrators' fees, expert witness fees, and attorney's fees, may
be awarded to the prevailing party, in the discretion of the arbitrators, or may
be apportioned between the parties in any manner deemed appropriate by the
arbitrators. Unless and until the arbitrators decide that one party is to pay
for all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrators' fees as and when billed by the arbitrators.

                           9.2.7 CONFIDENTIALITY. Except as set forth below, the
parties shall keep confidential the fact of the arbitration, the dispute being
arbitrated, and the decision of the arbitrators. Notwithstanding the foregoing,
the parties may disclose information about the arbitration to persons who have a
need to know, such as directors, trustees, management employees, witnesses,
experts, investors, attorneys, lenders, insurers, and others who may be directly
affected. Additionally, if a party has stock which is publicly traded, the party
may make such disclosures as are required by applicable securities laws.
Further, if a party is expressly asked by a third party about the dispute or the
arbitration, the party may disclose and acknowledge in general and limited terms
that there is a dispute with the other party which is being (or has been)
arbitrated. Once the arbitration award has become final, if the arbitration
award is not promptly satisfied, then these confidentiality provisions shall no
longer be applicable.

                  9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof. There shall be no amendments or modifications to this Agreement,
except by a written document which is signed by both parties.

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       11

<PAGE>

                  9.4 CALIFORNIA LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of California notwithstanding
any conflict of laws provisions.

                  9.5 HEADINGS. The headings for each article and section in
this Agreement have been inserted for the convenience of reference only and are
not intended to limit or expand on the meaning of the language contained in the
particular article or section.

                  9.6 SEVERABILITY. Should any one or more of the provisions of
this Agreement be held invalid or unenforceable by a court of competent
jurisdiction, it shall be considered severed from this Agreement and shall not
serve to invalidate the remaining provisions thereof. The parties shall make a
good faith effort to replace any invalid or unenforceable provision with a valid
and enforceable one such that the objectives contemplated by them when entering
this Agreement may be realized.

                  9.7 NO WAIVER. Any delay in enforcing a party's rights under
this Agreement or any waiver as to a particular default or other matter shall
not constitute a waiver of such party's rights to the future enforcement of its
rights under this Agreement, excepting only as to an express written and signed
waiver as to a particular matter for a particular period of time.

                  9.8 ATTORNEYS' FEES. In the event of a dispute among the
parties hereto or in the event of any default hereunder, the party prevailing in
the resolution of any such dispute or default shall be entitled to recover its
reasonable attorneys' fees and other costs incurred in connection with resolving
such dispute or default.

                  9.9 NOTICES. Any notices required by this Agreement shall be
in writing, shall specifically refer to this Agreement and shall be sent by
registered or certified airmail, postage prepaid, or by telefax, telex or cable,
charges prepaid, or by overnight courier, postage prepaid, and shall be
forwarded to the respective addresses set forth below unless subsequently
changed by written notice to the other party:

         FOR SCRIPPS:               The Scripps Research Institute
                                    10550 North Torrey Pines Road, TPC-9
                                    La Jolla, California 92037
                                    Attn: Director, Technology Development
                                    Fax No.:  (858) 784-9910

         With a copy to:            The Scripps Research Institute
                                    10550 North Torrey Pines Road, TPC-8
                                    La Jolla, California  92037
                                    Attention: General Counsel
                                    Fax No.:  (858) 784-9910

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       12

<PAGE>

         FOR OPTIONEE:              MICROISLET, INC.
                                    6370 Nancy Ridge Drive, Suite 112
                                    San Diego, California 92121
                                    Attn: President/COO
                                    Fax No.: 619-374-7049

Notice shall be deemed delivered upon the earlier of (i) when received, (ii)
three (3) days after deposit into the mail, (iii) the date notice is sent via
telefax, telex or cable, or (iv) the day immediately following delivery to
overnight courier (except Sunday and holidays).

                  9.10 COMPLIANCE WITH U.S. LAWS. Nothing contained in this
Agreement shall require or permit Scripps or Optionee to do any act inconsistent
with the requirements of any United States law, regulation or executive order as
the same may be in effect from time to time.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
by their duly authorized representatives as of the date set forth above.

SCRIPPS:                                        OPTIONEE:

THE SCRIPPS RESEARCH INSTITUTE                  MICROISLET, INC.

By: /s/ Arnold LaGuardia                        By: /s/ Hartoun Hartounian
    ------------------------------                  ----------------------------
    Arnold LaGuardia

Title: Executive Vice President                 Title: President & COO
       ---------------------------                     -------------------------

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       13

<PAGE>

                                    EXHIBIT A

                                RESEARCH PROGRAM

SPECIFIC FUNDING PROPOSAL

TITLE: XENOTRANSPLANTATION OF PORCINE ISLETS PROTECTED BY ALGINATE
       ENCAPSULATION.

PRINCIPAL INVESTIGATOR: Daniel R. Salomon, M.D.
Department of Molecular and Experimental Medicine
The Scripps Research Institute

FUNDING COMPANY: MicroIslet, Inc.
      Contacts:  William G. Kachioff, CPA      Haro Hartounian, Ph.D.
                 Chief Financial Officer       President/Chief Operating Officer
                 Tel. (858) 657-0287           mailto:haro@microislet.com
                 FAX. (619) 374-7049
                 wkachioff@microislet.com

DEFINITION OF FIELD: Encapsulation of pancreatic islets for transplantation

INTRODUCTION: This Specific Funding Proposal is designed to test the thesis that
successful porcine islet xenotransplantation can be accomplished using a novel
encapsulation strategy being developed by MicroIslets, (La Jolla, CA). This
strategy is based on the use of an ultrapure alginate preparation and several
proprietary encapsulation technologies developed by the Company's scientists.
The ultrapure alginate is a superior, low endotoxin material ([***]) that allows
construction of highly reproducible spherical capsules with minimal capsule
fragmentation. As such, this alginate preparation is a major advance over
previous attempts to encapsulate islets for transplantation. Ultrapure alginate
preparations previously manufactured by MicroIslet scientists have already been
approved by the FDA for use in several unrelated clinical situations such as the
experimental treatment of cerebral vascular aneurysms. The production process
now being developed and refined by MicroIslets is also being designed for
scale-up to clinical grade processing (U.S. patent numbers: 6,303,355 and
6,365,385). The key objective of using ultrapure alginate in combination with a
[***] technology is the production of encapsulated porcine islet preparations
producing little host inflammatory or immune responses after transplantation. In
turn, over a decade of experience with encapsulation technologies indicates that
minimizing or eliminating these posttransplantation reactions will significantly
enhance successful islet survival and function.

PROJECT STRATEGY: The initial phase of studies will be done in [***] models of
xenotransplantation. The strategy is to start with [***], then [***] and
finally, [***] into nonhuman primates as a pre-clinical model.

Animal studies will be conducted to address the following questions:

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       14

<PAGE>

        IS THE TECHNOLOGY EFFECTIVE IN RELEVANT DIABETES MODELS?
        Dose and duration?
        Islet integrity, function and differential gene expression?

        IS THE TECHNOLOGY SAFE?
        Biocompatible?
        Donor- and/or xeno-specific immune responses? Potential for transmission
        of infectious disease (PERV)?

        WHAT IS THE FATE OF THE CAPSULES AND ALGINATE IN VIVO?
        Capsule distribution?
        Capsule degradation and clearance?

PRELIMINARY STUDIES:
A number of preliminary studies will be done to develop the systems required for
the formal experiments described in the next sections. First, a number of [***]
will be done to validate the technique and establish the yield and viability in
our hands. Second, islet preparations will be encapsulated and tested for [***]
and [***]. Third, several pilot studies of transplanting [***] or [***] islets
will be done into [***], some into [***] and others into [***]. The purpose of
these preliminary studies is to make sure the individual technical elements of
the system from islet isolation to encapsulation and transplantation are
established prior to the formal experiments and hypothesis testing outlined
next. An important question is whether the results will be significantly [***]
transplants. Our hypothesis is that the challenges represented by islet
isolation and encapsulation are [***]. We also predict that a successful
encapsulation technology will protect a [***] from rejection in a [***] as well
as a [***] in a [***]. If this is not correct, then appropriate adjustments in
our experimental plan will be made to further investigate the basis for such
[***] between [***] and [***].

UPON COMPLETION OF THE PRELIMINARY STUDIES WE WILL INITIATE THE FOLLOWING SERIES
OF FORMAL EXPERIMENTS.

SERIES #1: [***] encapsulated and transplanted into [***]. Islets will be
retrieved at [***].

         EXPERIMENTAL QUESTIONS/OUTCOME PARAMETERS: Can [***] be purified,
encapsulated, transplanted, retrieved and tested for integrity in an animal
model with no adaptive [***]? Islet integrity will be assessed post retrieval by
[***]. Capsule integrity will be tested by MicroIslet using their engineering
criteria.

SERIES #2: [***] encapsulated and transplanted into [***]. Islets will be
retrieved at [***].

         EXPERIMENTAL QUESTIONS/OUTCOME PARAMETERS: Can encapsulated [***] cure
diabetic [***] and function for up to one year? Will islet integrity be affected
by concommitant diabetes? This model is designed to remove issues related to

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       15

<PAGE>

adaptive immunity from the interpretation of the results. In combination with
Series #3 it will allow a first prediction on a requirement for
immunosuppression (see below). Function of encapsulated islets will be followed
by serial blood glucose and body weight determinations, monthly intravenous
glucose tolerance, Hgb A1C testing and C-peptide monitoring.

SERIES #3: [***] encapsulated and transplanted into [***]. Islets will be
retrieved at [***].

         EXPERIMENTAL QUESTIONS/OUTCOME PARAMETERS: Can encapsulated [***] cure
diabetic [***] and function for up to one year? Will islet integrity be affected
by immune responses either to the [***] or to the capsules? In combination with
Series #2 the intent is to determine what additional impact an intact adaptive
immune system might have on the survival and function of encapsulated xenogeneic
islets. If there is a significant difference between the outcome parameters
comparing Series #2 to #3, then additional experiments will be done to determine
if immunosuppression will be necessary for an optimal therapy strategy.

         A limited immune testing strategy will include detecting [***]
antibodies by testing serial animal plasma samples for staining against freshly
isolated [***] islets by flourescence immunohistology and flow cytometry. If
positive, then [***] islets and [***] lymphocytes from two or more different
strains will be tested to determine if the antibodies are directed to [***].
[***] responses will be tested for by modified [***] where [***] cell
populations will be targets for [***] from transplanted [***] at [***] and cell
killing assessed by measuring apoptosis with [***] using labeled [***].

SERIES #4: Pig islets encapsulated and transplanted into [***]. Islets will be
retrieved at [***].

         EXPERIMENTAL QUESTIONS/OUTCOME PARAMETERS: Can encapsulated pig islets
survive and function after encapsulation and transplantation in an
immunodeficient animal? One additional outcome parameter applied in these
studies will be production of porcine C-peptide that can be measured in [***]
with normal native islet function. A second outcome parameter will be
measurements of [***] in the retrieved islets and various tissue compartments in
the transplanted animals using quantitative [***] methodology available in our
laboratory. If evidence of [***] sequences in [***] tissues is detected by [***]
then additional studies for pig cell microchimerism will be done with pig
cytochrome-specific [***] and for active [***] viral expression by [***] as we
have previously published. The third outcome parameter will be detection of
[***] in peritoneal washings of transplanted animals at serial time points
posttransplant to determine if [***] is being shed by the encapsulated pig
islets either directly through intact capsules or by loss of capsule integrity
as a function of time. Parallel studies will be done with encapsulated pig
islets in culture to demonstrate whether an intact capsule allows release of
[***].

SERIES #5: Pig islets encapsulated and transplanted into [***]. Islets will be
retrieved at [***].

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       16

<PAGE>

         EXPERIMENTAL QUESTIONS/OUTCOME PARAMETERS: Can encapsulated pig islets
survive and function after encapsulation and transplantation in a
non-immunosuppressed animal with an intact adaptive immune response? The immune
function testing will be identical to that described in Series #3 with the
exception that [***] and lymphocytes will serve as the targets.

         [***] will be identical to that described in Series #4 except that
additional studies of [***] will be done by [***] with [***] samples from
transplanted animals.

SERIES #6: Pig islets encapsulated and transplanted into [***]. Islets will be
retrieved at [***].

         EXPERIMENTAL QUESTIONS/OUTCOME PARAMETERS: Can encapsulated pig islets
survive and function after encapsulation and transplantation in a
non-immunosuppressed animal with an active and islet-destructive immune
response? Outcome parameters will be essentially the same as already described
though [***] testing will be done only on a limited basis. An additional outcome
parameter will be testing for [***] using [***]. If positive, then attempts to
determine if [***] reactivity is due to [***] or [***] or [***]. A very
interesting additional set of studies might be done to examine cell-[***] in
these animals with transplanted pig islets to sort out autoimmune-mediated islet
cell responses from [***]. However, these are challenging and complicated assays
that are beyond the applied scope of this proposal, which is intended to set the
stage for preclinical studies in a diabetic nonhuman primate model.

SUMMARY - FUNCTIONAL AND TOXICITY OUTCOME PARAMETERS:
o        Functional data for up to 12 mos. Post-transplant
o        Blood glucose levels (fasting and stimulated)
o        Hgb A1c levels
o        Endogenous [***] and porcine c-peptide levels (fasting and stimulated
         by glucose/arginine)
o        Retrieval and testing of transplanted islets/capsules
o        Selected immune response testing
o        Testing possible impact of preexisting islet autoimmunity in [***]
o        [***] expression and [***]/release testing
o        General toxicity
          o        Body weight change
          o        Food consumption
          o        Clinical observations
          o        Clinical chemistries
          o        Hematology
          o        Urinalysis

[BIOCOMPATIBILITY AND INFLAMMATORY/IMMUNE RESPONSES
         A potential limitation of these studies is the possibility that some
kind of bioincompatibility resulting in a limited inflammatory immune response
will be documented very early in the testing protocol. In this case the reaction
would presumably be to some component of the capsule formulation. If so, the

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       17

<PAGE>

nature and extent of this reaction will be measured using [***] and other
strategies such as [***] and [***] assays. It is also possible that
inflammatory/immune reactions will only be seen at the point in these studies
when we begin to transplant encapsulated [***]. Similarly it is also possible
that the use of [***] will be the trigger for such reactions or that these will
be qualitatively or quantitatively different than those seen with [***]. In case
of encountering any of these patterns they will be investigated. Moreover, we
will test the potential of using a limited immunosuppression, [***], to overcome
these inflammatory/immune reactions.

         We acknowledge that the requirement for any immunosuppression is a less
than optimal result. However, the potential of circumventing the islet shortage
by use of encapsulated pig islets would still be a major advance even if it
required immunosuppression for success. To the extent that this
immunosuppression would be less intense, more limited in numbers of drugs used
and/or short term as compared to standard immunosuppressive regimes currently
required, it would translate into a very viable clinical strategy.]

CONCLUSIONS: The overarching rationale for the studies outlined here is to
create a coherent data set that moves logically from [***]. In the process, we
will create a large enough data set in several well characterized [***] models
of islet xenotransplantation that presentation to scientists will convincingly
demonstrate the utility of the MicroIslet encapsulation technology, set the
stage for preclinical studies in diabetic nonhuman primates and can be presented
to the FDA as part of the IND process for human clinical trials. Thus, even the
redundancy that we acknowledge is created by the overlapping designs using [***]
and then [***] for encapsulation will serve to better advance the agenda of
developing the most robust data set to prove the utility of the technology.

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       18

<PAGE>

                                    EXHIBIT B

                                     BUDGET

TO BE PAID MONTHLY IN ADVANCE.

Specific Funding Proposal: MicroIslet, Inc.
Principal Investigator: Daniel R. Salomon, M.D.
Project Title: Xenotransplantation of porcine islets protested by alginate
               encapsulation

                                           Year 1            Year 2
                                           Salary/           Salary/
Personnel                 %  Effort        Fringe            Fringe
-----------------------------------------------------------------------------
Daniel R. Salomon (P.I.)   [***]            [***]             [***]
Alexander Szabo (Post-doc) [***]            [***]             [***]
TBD (Rsch Tech.)           [***]            [***]             [***]
TOTAL Personnel                             $93,868           $93,868

Supplies
-----------------------------------------------------------------------------
Animals
Purchase, board, care                       [***]             [***]
Chemicals                                   [***]             [***]
Molecular reagents                          [***]             [***]
Plasticware/disposables                     [***]             [***]
Tissue culture materials                    [***]             [***]
Antibodies/assay materials                  [***]             [***]
TOTAL Supplies
-----------------------------------------------------------------------------
Total Direct                                $125,000          $125,000
IDC (85.2%)                                 $106,500          $106,500
ISR (10%)                                   $ 23,150          $ 23,150
TOTAL/YEAR                                  $254,650          $254,650

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       19

<PAGE>

                                    EXHIBIT C

                            FORM OF LICENSE AGREEMENT

*** Confidential portions of this document have been redacted and filed
separately with the Commission.

                                       20
<PAGE>

                                LICENSE AGREEMENT

                                 BY AND BETWEEN

                         THE SCRIPPS RESEARCH INSTITUTE,
                             A CALIFORNIA NONPROFIT
                           PUBLIC BENEFIT CORPORATION

                                       AND

                              -------------------,
                           A ____________ CORPORATION

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                                                                            Page
                                                                            ----

1.       Definitions.........................................................-1-
         1.1  Affiliate......................................................-1-
         1.2  Agricultural Products..........................................-2-
         1.3  Confidential Information.......................................-2-
         1.4  Field..........................................................-2-
         1.5  Licensed Product...............................................-2-
         1.6  Net Sales......................................................-2-
         1.7  Scripps Patent Rights..........................................-3-
         1.8  Scripps Technology.............................................-3-

2.       License Terms and Conditions........................................-3-
         2.1  Grant of License...............................................-3-
         2.2  Initial License Fee............................................-3-
         2.3  Royalties......................................................-3-
                  2.3.1  Percentage Royalty..................................-3-
                  2.3.2  Minimum Royalty.....................................-4-
         2.4  Combination Products...........................................-4-
                  2.4.1  Definition of Combination Product...................-4-
                  2.4.2  Royalty Payable on Combination Products.............-4-
         2.5  Quarterly Payments.............................................-5-
         2.6  Term of License................................................-5-
         2.7  Sublicense.....................................................-5-
         2.8  Duration of Royalty Obligations................................-6-
         2.9  Reports........................................................-6-
         2.10 Records........................................................-6-
         2.11 Foreign Sales..................................................-7-
         2.12 Foreign Taxes..................................................-7-

3.       Patent Matters......................................................-7-
         3.1  Patent Prosecution and Maintenance.............................-7-
         3.2  Information to Licensee........................................-8-
         3.3  Patent Costs...................................................-8-
         3.4  Ownership......................................................-8-
         3.5  Scripps Right to Pursue Patent.................................-8-
         3.6  Infringement Actions...........................................-8-
                  3.6.1  Prosecution and Defense of Infringements............-8-
                  3.6.2  Allocation of Recovery..............................-9-

4.       Obligations Related to Commercialization............................-9-
         4.1  Commercial Development Obligation..............................-9-
         4.2  Governmental Approvals and Marketing of Licensed Products.....-10-

                                       -i-

<PAGE>

         4.3  Indemnity.....................................................-10-
         4.4  Patent Marking................................................-10-
         4.5  No Use of Name................................................-10-
         4.6  U.S. Manufacture..............................................-10-
         4.7  Foreign Registration..........................................-10-

5.       Limited Warranty...................................................-10-

6.       Interests in Intellectual Property Rights..........................-11-
         6.1  Preservation of Title.........................................-11-
         6.2  Royalty-free License to Improvements..........................-11-
         6.3  Governmental Interest.........................................-11-
         6.4  Reservation of Rights.........................................-11-

7.       Confidentiality and Publication....................................-11-
         7.1  Treatment of Confidential Information.........................-11-
         7.2  Publications..................................................-12-
         7.3  Publicity.....................................................-12-

8.       Term and Termination...............................................-12-
         8.1  Term..........................................................-12-
         8.2  Termination Upon Default......................................-12-
         8.3  Termination Upon Bankruptcy or Insolvency.....................-12-
         8.4  Rights Upon Expiration........................................-13-
         8.5  Rights Upon Termination.......................................-13-
         8.6  Work-in-Progress..............................................-13-

9.       Assignment; Successors.............................................-13-
         9.1  Assignment....................................................-13-
         9.2  Binding Upon Successors and Assigns...........................-13-

10.      General Provisions.................................................-13-
         10.1  Independent Contractors......................................-14-
         10.2  Arbitration..................................................-14-
                  10.2.1   Location.........................................-14-
                  10.2.2   Selection of Arbitrators.........................-14-
                  10.2.3   Discovery........................................-14-
                  10.2.4   Case Management..................................-14-
                  10.2.5   Remedies.........................................-15-
                  10.2.6   Expenses.........................................-15-
                  10.2.7   Confidentiality..................................-15-
         10.3  Entire Agreement; Modification...............................-15-
         10.4  California Law...............................................-15-
         10.5  Headings.....................................................-15-
         10.6  Severability.................................................-15-
         10.7  No Waiver....................................................-16-

                                      -ii-

<PAGE>

         10.8  Name.........................................................-16-
         10.9  Attorneys' Fees..............................................-16-
         10.10  Notices.....................................................-16-
         10.11  Compliance with U.S. Laws...................................-17-

                                      -iii-

<PAGE>

                                LICENSE AGREEMENT
                                -----------------

                  This License Agreement is entered into and made effective as
of this _______ day of ____________________, 2001, by and between THE SCRIPPS
RESEARCH INSTITUTE, a California nonprofit public benefit corporation
("Scripps") located at 10550 North Torrey Pines Road, La Jolla, California
92037, and _______________________, a ______________ corporation ("Licensee")
located at _________________________________________________, with respect to
the facts set forth below.

                                    RECITALS
                                    --------

                  A. Scripps is engaged in fundamental scientific biomedical and
biochemical research including research relating to __________________________.

                  B. Licensee is engaged in research and development of
_______________________ for _______________________.

                  C. Scripps has disclosed to Licensee certain technology and
Scripps has the exclusive right to grant a license to the technology, subject to
certain rights of the U.S. Government to use such technology for its own
purposes, resulting from the receipt by Scripps of certain funding from the U.S.
Government.

                  D. Scripps desires to grant to Licensee, and Licensee wishes
to acquire from Scripps, an exclusive worldwide right and license to the
technology and to certain patent rights and know-how of Scripps with respect
thereto, subject to the terms and conditions set forth herein.

                                    AGREEMENT
                                    ---------

                  NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, Scripps and Licensee hereby agree as follows:

                          1. DEFINITIONS. Capitalized terms shall have the
meaning set forth below.

                          1.1 AFFILIATE. The term "Affiliate" shall mean any
entity which directly or indirectly controls, is controlled by or is under
common control with Licensee. The term "control" as used herein means the
possession of the power to direct or cause the direction of the management and
the policies of an entity, whether through the ownership of a majority of the
outstanding voting securities or by contract or otherwise.

                                       1
<PAGE>

                          1.2 AGRICULTURAL PRODUCTS The term "Agricultural
Product", individually, or "Agricultural Products", collectively, shall mean any
one or more product, device, method, procedure, software, computer program,
material, or element utilized by the agricultural and farming industry for the
purpose of improving, restricting or otherwise modifying growth or productivity
of plants; or preventing or treating disease or insect or fungal infestation in
plants; or controlling or modifying certain traits of plants or producing
improved or modified seeds and plants; or techniques and methods for evaluating
efficacy or determining the safety of an Agricultural Product such as
utilization in determining toxicity to living things or otherwise involved in
the general field of agriculture.

                          1.3 CONFIDENTIAL INFORMATION. The term "Confidential
Information" shall mean any and all proprietary or confidential information of
Scripps or Licensee which may be exchanged between the parties at any time and
from time to time during the term of this Agreement. Information shall not be
considered confidential to the extent that it:

                                    a. Is publicly disclosed through no fault of
any party hereto, either before or after it becomes known to the receiving
party; or

                                    b. Was known to the receiving party prior to
the date of this Agreement, which knowledge was acquired independently and not
from another party hereto (or such party's employees); or

                                    c. Is subsequently disclosed to the
receiving party in good faith by a third party who has a right to make such
disclosure; or

                                    d. Has been published by a third party as a
matter of right.

                          1.4 FIELD. The term "Field" shall mean _________
___________________________________________________ and shall specifically
exclude any Agricultural Product.

                          1.5 LICENSED PRODUCT. The term "Licensed Product"
shall mean any product which cannot be developed, manufactured, offered for
sale, used or sold without (i) infringing one or more claims under Scripps
Patent Rights or (ii) utilizing any part of Scripps Technology not otherwise
includable within Scripps Patent Rights.

                          1.6 NET SALES. The term "Net Sales" shall mean the
gross amount invoiced by Licensee, or its Affiliates and sublicensees, or any of
them, on all sales of Licensed Products, less (i) discounts actually allowed,
(ii) credits for claims, allowances, retroactive price reductions or returned
goods, (iii) prepaid freight and (iv) sales taxes or other governmental charges
actually paid in connection with sales of Licensed Products (but excluding what
are commonly known as income taxes and value-added taxes). For purposes of
determining Net Sales, a sale shall be deemed to have occurred when an invoice
therefor shall be generated or the Licensed Product shipped for delivery. Sales
of Licensed Products by Licensee, or an Affiliate or sublicensee of Licensee to
any Affiliate or sublicensee which is a reseller thereof shall be excluded, and

                                       2
<PAGE>

only the subsequent sale of such Licensed Products by Affiliates or sublicensees
of Licensee to unrelated parties shall be deemed Net Sales hereunder.

                          1.7 SCRIPPS PATENT RIGHTS. The term "Scripps Patent
Rights" shall mean rights arising out of or resulting from (i) the U.S./PCT
Patent Application(s) set forth on Exhibit A, (ii) the foreign patent
applications of (i), (iii) the patents proceeding from (i) and (ii), (iv) all
claims of continuations-in-part that are entitled to the benefit of the priority
date of (i), and (v) divisionals, continuations, reissues, reexaminations, and
extensions of any patent or application set forth in (i)-(iv) above, so long as
said patents have not been held invalid and/or unenforceable by a court of
competent jurisdiction from which there is no appeal or, if appealable, from
which no appeal has been taken.

                          1.8 SCRIPPS TECHNOLOGY. [optional] The term "Scripps
Technology" shall mean so much of the technology as is proprietary to Scripps
disclosed in __________________________ (____________), a copy of which is
attached as Exhibit A hereto and incorporated herein by reference, together with
materials, information and know-how related thereto [as described on
____________________] whether or not the same is eligible for protection under
the patent laws of the United States or elsewhere, and whether or not any such
processes and technology, or information related thereto, would be enforceable
as a trade secret or the copying of which would be enjoined or restrained by a
court as constituting unfair competition.

                          2. LICENSE TERMS AND CONDITIONS.

                          2.1 GRANT OF LICENSE. Scripps hereby grants to
Licensee an exclusive, worldwide license, including the right to sublicense, to
Scripps Technology and under Scripps Patent Rights, to make, to have made, to
import, to use, to offer for sale, and to sell Licensed Products in the Field,
subject to the terms of this Agreement.

                          2.2 INITIAL LICENSE FEE. In partial consideration for
the exclusive license granted pursuant to Section 2.1 hereof, Licensee shall pay
to Scripps a nonrefundable license fee upon execution of this Agreement in the
amount of ____________________ Dollars ($__________). The license fee described
in this Section is consideration for the grant and continuation of the license
hereunder, and Scripps shall have no obligation to return any portion of such
license fee, notwithstanding any failure by Licensee to develop any Licensed
Product or market any Licensed Product commercially, and notwithstanding the
volume of sales of any such Licensed Product.

                           2.3  ROYALTIES.

                                    2.3.1 PERCENTAGE ROYALTY. As additional
consideration for the exclusive license granted pursuant to Section 2.1 hereof,
Licensee shall pay to Scripps a continuing royalty on a country-by-country basis
in the amount of (i) ______ percent (___%) of Net Sales of Licensed Products
which cannot be made, used or sold in such country without utilizing one or more
valid claims under Scripps Patent Rights and (ii) ________ percent (___%) of Net
Sales of all other Licensed Products.

                                       3
<PAGE>

                                    2.3.2 MINIMUM ROYALTY. From and after
____________________, 20___, in order to maintain the license granted hereunder
in force, Licensee shall pay to Scripps a minimum annual royalty. The minimum
annual royalty for the twelve (12) month period beginning with such date shall
be ____________________ Dollars ($____________), and the amount of the minimum
annual royalty payable for each subsequent twelve (12) month period during the
term hereof shall be the greater of ____________________ Dollars ($____________)
or __________ percent (____%) of the total royalties payable under this
Agreement during the immediately preceding twelve (12) month period. Any
percentage royalties earned and paid to Scripps pursuant to Section 2.3.1 hereof
for any twelve (12) month period shall be credited against the minimum royalty
payable for such period, and the payment of any shortfall between actual
royalties paid and the minimum annual royalty applicable to such twelve (12)
month period shall be payable to Scripps within sixty (60) days after the last
day of such twelve (12) month period.

                          2.4  COMBINATION PRODUCTS.

                                    2.4.1 DEFINITION OF COMBINATION PRODUCT. As
used herein, the term "Combination Product" shall mean a Licensed Product which
cannot be manufactured, offered to sell, used or sold without infringing Scripps
Patent Rights, utilizing Scripps Technology licensed hereunder, infringing or
utilizing one or more patents or proprietary technology or know-how of (i)
Licensee, (ii) a third party licensed pursuant to an agreement between Licensee
and such third party, or (iii) Scripps under a license agreement other than this
Agreement (referred to herein as "other licensed rights").

                                    2.4.2 ROYALTY PAYABLE ON COMBINATION
PRODUCTS. The royalty payable on Combination Products shall be the royalty rate
set forth in Section 2.2.1 above based on a pro rata portion of Net Sales of
Combination Products in accordance with the following formula:

                                            X = A/B,  where

                                            X = the pro rata portion of Net
                                    Sales attributable to Scripps Patent Rights
                                    or other Scripps Technology licensed herein
                                    (expressed as a percentage), and

                                            A = the fair market value of the
                                    component in the Combination Product
                                    utilizing Scripps Technology licensed
                                    hereunder, and

                                            B = A plus the fair market value of
                                    all other components in the Combination
                                    Product using other licensed rights.

The fair market values described above shall be determined by the parties hereto
in good faith. In the absence of agreement as to the fair market value of all of

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<PAGE>

the components contained in a Combination Product, the fair market value of each
component shall be determined by arbitration in accordance with the provisions
of Section 10.2 hereof.

                          2.5 QUARTERLY PAYMENTS.

                                    2.5.1 SALES BY LICENSEE. With regard to Net
Sales made by Licensee or its Affiliates, royalties shall be payable by Licensee
quarterly, within sixty (60) days after the end of each calendar quarter, based
upon the Net Sales of Licensed Products during such preceding calendar quarter,
commencing with the calendar quarter in which the first commercial sale of any
Licensed Product is made.

                                    2.5.2 SALES BY SUBLICENSEES. With regard to
Net Sales made by sublicensees of Licensee or its Affiliates, royalties shall be
payable by Licensee quarterly, within ninety (90) days after the end of each
calendar quarter, based upon the Net Sales of Licensed Products by such
sublicensee during such preceding calendar quarter, commencing with the calendar
quarter in which the first commercial sale of any Licensed Product is made by
such sublicensee.

                          2.6 TERM OF LICENSE. Unless terminated sooner in
accordance with the provisions of this Agreement, the term of this license shall
expire when the last of the royalty obligations set forth has expired.
Notwithstanding the foregoing, if applicable government regulations require a
shorter term and/or a shorter term of exclusivity than provided for herein, then
the term of this License Agreement shall be so shortened or this License
Agreement shall be amended to provide for a non-exclusive license, and, in such
event, the parties shall negotiate in good faith to reduce appropriately the
royalties payable as set forth under the section heading "Royalties" hereof.

                          2.7 SUBLICENSE. Licensee shall have the sole and
exclusive right to grant sublicenses to any party with respect to the rights
conferred upon Licensee under this Agreement, provided, however, that (i) any
such sublicense shall be subject in all respects to the restrictions,
exceptions, royalty obligations, reports, termination provisions, and other
provisions contained in this Agreement (but not including the payment of a
license fee pursuant to Section 2.2 hereof) and (ii) each such sublicensee, and
the form and substance of each such sublicense, shall be subject to the prior
written approval of Scripps, which approval shall not be unreasonably withheld,
provided, however, that any sublicense granted to an Affiliate of Licensee shall
not be subject to Scripps' prior written approval. No approval shall be required
as to any sublicense which utilizes the form of sublicense attached hereto as
Exhibit B. Licensee shall pay Scripps, or cause its Affiliate or sublicensee to
pay Scripps, the same royalties on all Net Sales of such Affiliate or
sublicensee the same as if said Net Sales had been made by Licensee. Each
Affiliate and sublicensee shall report its Net Sales to Scripps through
Licensee, which Net Sales shall be aggregated with any Net Sales of Licensee for
purposes of determining the Net Sales upon which royalties are to be paid to
Scripps.

                          Any and all sublicense revenues, other than royalties,
lines of credit, and research and development funding, due Licensee pursuant to
the grant of a sublicense to a party not an Affiliate shall be reported to
Scripps by Licensee within thirty (30) days of the effective date of such

                                       5
<PAGE>

sublicense agreement. Licensee shall pay to Scripps a percentage of these
sublicense revenues according to the following schedule:

         Date of Sublicense Grant                 Percent of Revenues to Scripps
         ------------------------                 ------------------------------
         (from date of this Agreement)

         First six months                                          80%
         Second six months                                         70%
         Third six months                                          60%
         Fourth six months                                         50%
         Third year                                                40%
         Fourth year and beyond                                    30%

Any non-cash consideration received by licensee from sublicensees shall be
valued at its fair market value as of the date of receipt. All payments shall be
made to Scripps within thirty (30) days of the effective date of such sublicense
agreement.

                          2.8 DURATION OF ROYALTY OBLIGATIONS. The royalty
obligations of Licensee as to each Licensed Product shall terminate on a
country-by-country basis concurrently with the expiration of the last to expire
of Scripps Patent Rights utilized by or in such Licensed Product in each such
country or, with respect to Licensed Products not utilizing any Scripps Patent
Rights, fifteen (15) years after the date of first commercial sale of such
Licensed Product in such country.

                          2.9 REPORTS. Licensee shall furnish to Scripps at the
same time as each royalty payment is made by Licensee, a detailed written report
of Net Sales of the Licensed Products and the royalty due and payable thereon,
including a description of any offsets or credits deducted therefrom, on a
product-by-product and country-by-country basis, for the calendar quarter upon
which the royalty payment is based.

                          2.10 RECORDS. Licensee shall keep, and cause its
Affiliates and sublicensees to keep, full, complete and proper records and
accounts of all sales of Licensed Products in sufficient detail to enable the
royalties payable on Net Sales of each Licensed Product to be determined.
Scripps shall have the right to appoint an independent certified public
accounting firm approved by Licensee, which approval shall not be unreasonably
withheld, to audit the records of Licensee, its Affiliates and sublicensees as
necessary to verify the royalties payable pursuant to this Agreement. Licensee,
its Affiliates and sublicensees shall pay to Scripps an amount equal to any
additional royalties to which Scripps is entitled as disclosed by the audit,
plus interest thereon at the rate of one and one-half percent (1.5%) per month.
Such audit shall be at Scripps' expense; provided, however, that if the audit
discloses that Scripps was underpaid royalties with respect to any Licensed
Product by at least five percent (5%) for any calendar quarter, then Licensee,
its Affiliates or sublicensee, as the case may be shall reimburse Scripps for
any such audit costs. Scripps may exercise its right of audit as to each of
Licensee, its Affiliates or sublicensees no more frequently than once in any
calendar year. The accounting firm shall disclose to Scripps only information
relating to the accuracy of the royalty payments. Licensee, its Affiliates and
sublicensees shall preserve and maintain all such records required for audit for
a period of three (3) years after the calendar quarter to which the record
applies.

                                       6
<PAGE>

                          2.11 FOREIGN SALES. The remittance of royalties
payable on sales outside the United States shall be payable to Scripps in United
States Dollar equivalents at the official rate of exchange of the currency of
the country from which the royalties are payable, as quoted in the Wall Street
Journal for the last business day of the calendar quarter in which the royalties
are payable. If the transfer of or the conversion into the United States Dollar
equivalents of any such remittance in any such instance is not lawful or
possible, the payment of such part of the royalties as is necessary shall be
made by the deposit thereof, in the currency of the country where the sale was
made on which the royalty was based to the credit and account of Scripps or its
nominee in any commercial bank or trust company of Scripps' choice located in
that country, prompt written notice of which shall be given by Licensee to
Scripps.

                          2.12 FOREIGN TAXES. Any tax required to be withheld by
Licensee under the laws of any foreign country for the accounts of Scripps shall
be promptly paid by Licensee for and on behalf of Scripps to the appropriate
governmental authority, and Licensee shall use its best efforts to furnish
Scripps with proof of payment of such tax together with official or other
appropriate evidence issued by the applicable government authority. Any such tax
actually paid on Scripps' behalf shall be deducted from royalty payments due
Scripps.

                          3. PATENT MATTERS.

                          3.1 PATENT PROSECUTION AND MAINTENANCE. From and after
the date of this Agreement, the provisions of this Section 3 shall control the
prosecution and maintenance of any patent included within Scripps Patent Rights.
Subject to the requirements, limitations and conditions set forth in this
Agreement, Scripps shall direct and control (i) the preparation, filing and
prosecution of the United States and foreign patent applications within Scripps
Patent Rights (including any interferences and foreign oppositions) and (ii)
maintain the patents issuing therefrom. Scripps shall select the patent
attorney, subject to Licensee's written approval, which approval shall not be
unreasonably withheld. Both parties hereto agree that Scripps may, at its sole
discretion, utilize Scripps' Office of Patent Counsel in lieu of independent
counsel for patent prosecution and maintenance described herein, and the fees
and expenses incurred by Scripps with respect to work done by such Office of
Patent Counsel shall be paid as set forth below. Licensee shall have full rights
of consultation with the patent attorney so selected on all matters relating to
Scripps Patent Rights. Scripps shall use its best efforts to implement all
reasonable requests made by Licensee with regard to the preparation, filing,
prosecution and/or maintenance of the patent applications and/or patents within
Scripps Patent Rights.

                          3.2 INFORMATION TO LICENSEE. Scripps shall keep
Licensee informed with regard to the patent application and maintenance
processes. Scripps shall deliver to Licensee copies of all patent applications,
amendments, related correspondence, and other related matters.

                          3.3 PATENT COSTS. Licensee acknowledges and agrees
that Scripps does not have independent funding to cover patent costs, and that
the license granted hereunder is in partial consideration for Licensee's
assumption of patent costs and expenses as described herein. Licensee shall pay
for all expenses incurred by Scripps pursuant to Section 3.1 hereof. In
addition, Licensee agrees to reimburse Scripps for all patent costs and expenses
paid or incurred by Scripps to date in connection with Scripps Patent Rights
licensed hereunder. Licensee agrees

                                       7
<PAGE>

to pay all such past and future patent expenses directly or to reimburse Scripps
for the payment of such expenses within sixty (60) days after Licensee receives
an itemized invoice therefor. In the event Licensee elects to discontinue
payment for the filing, prosecution and/or maintenance of any patent application
and/or patent within Scripps Patent Rights, any such patent application or
patent shall be excluded from the definition of Scripps Patent Rights and from
the scope of the license granted under this Agreement, and all rights relating
thereto shall revert to Scripps and may be freely licensed by Scripps. Licensee
shall give Scripps at least sixty (60) days' prior written notice of such
election. No such notice shall have any effect on Licensee's obligations to pay
expenses incurred up to the effective date of such election.

                          3.4 OWNERSHIP. The patent applications filed and the
patents obtained by Scripps pursuant to Section 3.1 hereof shall be owned solely
by Scripps, assigned to Scripps and deemed a part of Scripps Patent Rights.

                          3.5 SCRIPPS RIGHT TO PURSUE PATENT. If at any time
during the term of this Agreement, Licensee's rights with respect to Scripps
Patent Rights are terminated, Scripps shall have the right to take whatever
action Scripps deems appropriate to obtain or maintain the corresponding patent
protection at its own expense. If Scripps pursues patents under this Section
3.5, Licensee agrees to cooperate fully, including by providing, at no charge to
Scripps, all appropriate technical data and executing all necessary legal
documents.

                          3.6 INFRINGEMENT ACTIONS.

                                    3.6.1 PROSECUTION AND DEFENSE OF
INFRINGEMENTS. In order to maintain the license granted hereunder in force,
Licensee shall prosecute any and all infringements of any Scripps Patent Rights
and shall defend all charges of infringement arising as a result of the exercise
of Scripps Patent Rights by Licensee, its Affiliates or sublicensees, unless
otherwise agreed to between Scripps and Licensee. Licensee may enter into
settlements, stipulated judgments or other arrangements respecting such
infringement, at its own expense, but only with the prior written consent of
Scripps, which consent shall not be unreasonably withheld. Scripps shall permit
any action to be brought in its name if required by law, and Licensee shall hold
Scripps harmless from any costs, expenses or liability respecting all such
infringements or charges of infringement. Scripps agrees to provide reasonable
assistance of a technical nature which Licensee may require in any litigation
arising in accordance with the provisions of this Section 3.6.1, for which
Licensee shall pay to Scripps a reasonable hourly rate of compensation. In the
event Licensee fails to prosecute any such infringement, Licensee shall notify
Scripps in writing promptly and Scripps shall have the right to prosecute such
infringement on its own behalf. Failure on the part of Licensee to prosecute any
such infringement shall be grounds for termination of the license granted to
Licensee hereunder, with respect to the country in which such infringement
occurs, at the option of Scripps.

                                    3.6.2 ALLOCATION OF RECOVERY. Any damages or
other recovery from an infringement action undertaken by Licensee pursuant to
Section 3.6.1 shall first be used to reimburse the parties for the costs and
expenses incurred in such action, and shall thereafter be allocated between the
parties as follows: (i) thirty percent (30%) to Scripps and (ii) seventy percent
(70%) to Licensee. If Licensee fails to prosecute any such action to completion,

                                       8
<PAGE>

then any damages or other recovery net of the parties' costs and expenses
incurred in such infringement action shall be the sole property of Scripps.

                          4. OBLIGATIONS RELATED TO COMMERCIALIZATION.

                          4.1 COMMERCIAL DEVELOPMENT OBLIGATION. In order to
maintain the license granted hereunder in force, Licensee shall use reasonable
efforts and due diligence to develop Scripps Technology and Scripps Patent
Rights which are licensed hereunder into commercially viable Licensed Products,
as promptly as is reasonably and commercially feasible, and thereafter to
produce and sell reasonable quantities of Licensed Products. Licensee shall keep
Scripps generally informed as to Licensee's progress in such development,
production and sale, including its efforts, if any, to sublicense Scripps
Technology and Scripps Patent Rights, and Licensee shall deliver to Scripps an
annual written report and such other reports as Scripps may reasonably request.
The parties hereto acknowledge and agree that achievement of the milestones
described in Exhibit C attached hereto on or before the dates set forth therein
shall be evidence of compliance by Licensee with its commercial development
obligations hereunder for the time periods specified in Exhibit C. In the event
Scripps has a reasonable basis to believe that Licensee is not using reasonable
efforts and due diligence as required hereunder, upon notice by Scripps to
Licensee which specifies the basis for such belief, Scripps and Licensee shall
negotiate in good faith to attempt to mutually resolve the issue. In the event
Scripps and Licensee cannot agree upon any matter related to Licensee's
commercial development obligations, the parties agree to utilize arbitration
pursuant to Section 10.2 hereof in order to resolve the matter. If the
arbitrator determines that Licensee has not complied with its obligations
hereunder, and such default is not fully cured within sixty (60) days after the
arbitrator's decision, Scripps may terminate Licensee's rights under this
Agreement.

                          4.2 GOVERNMENTAL APPROVALS AND MARKETING OF LICENSED
PRODUCTS. Licensee shall be responsible for obtaining all necessary governmental
approvals for the development, production, distribution, sale and use of any
Licensed Product, at Licensee's expense, including, without limitation, any
safety studies. Licensee shall have sole responsibility for any warning labels,
packaging and instructions as to the use of Licensed Products and for the
quality control for any Licensed Product.

                          4.3 INDEMNITY. Licensee hereby agrees to indemnify,
defend and hold harmless Scripps and any parent, subsidiary or other affiliated
entity and their trustees, officers, employees, scientists and agents from and
against any liability or expense arising from any product liability claim
asserted by any party as to any Licensed Product or any claims arising from the
use of any Scripps Patent Rights or Scripps Technology pursuant to this
Agreement. Such indemnity and defense obligation shall apply to any product
liability or other claims, including without limitation, personal injury, death
or property damage, made by employees, subcontractors, sublicensees, or agents
of Licensee, as well as any member of the general public. Licensee shall use its
best efforts to have Scripps and any parent, subsidiary or other affiliated
entity and their trustees, officers, employees, scientists and agents named as
additional insured parties on any product liability insurance policies
maintained by Licensee, its Affiliates and sublicensees applicable to Licensed
Products.

                                       9
<PAGE>

                          4.4 PATENT MARKING. To the extent required by
applicable law, Licensee shall mark all Licensed Products or their containers in
accordance with the applicable patent marking laws.

                          4.5 NO USE OF NAME. The use of the name "The Scripps
Research Institute", "Scripps", or any variation thereof in connection with the
advertising or sale of Licensed Products is expressly prohibited.

                          4.6 U.S. MANUFACTURE. To the extent required, Licensee
agrees to abide by the Preference for United States Industry as set forth in 37
CFR 401.14 (I). . 4.7 Foreign Registration. Licensee agrees to register this
Agreement -------------------- with any foreign governmental agency which
requires such registration, and Licensee shall pay all costs and legal fees in
connection therewith. In addition, Licensee shall assure that all foreign laws
affecting this Agreement or the sale of Licensed Products are fully satisfied.

                          5. LIMITED WARRANTY. Scripps hereby represents and
warrants that it has full right and power to enter into this Agreement. SCRIPPS
MAKES NO OTHER WARRANTIES CONCERNING SCRIPPS PATENT RIGHTS OR SCRIPPS TECHNOLOGY
COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO SCRIPPS
PATENT RIGHTS, SCRIPPS TECHNOLOGY OR ANY LICENSED PRODUCT. SCRIPPS MAKES NO
WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF SCRIPPS PATENT RIGHTS,
OR THAT ANY LICENSED PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR
OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES
ARE IN ANY WAY INFRINGING SCRIPPS PATENT RIGHTS OR SCRIPPS TECHNOLOGY COVERED BY
THIS AGREEMENT.

                          6. INTERESTS IN INTELLECTUAL PROPERTY RIGHTS.

                          6.1 PRESERVATION OF TITLE. Scripps shall retain full
ownership and title to Scripps Technology, and Scripps Patent Rights licensed
hereunder and shall use its reasonable best efforts to preserve and maintain
such full ownership and title, subject to Licensee fully performing all of its
obligations under this Agreement.

                          6.2 ROYALTY-FREE LICENSE TO IMPROVEMENTS. Licensee
hereby grants to Scripps a non-exclusive, royalty-free license to any
improvement to Scripps Technology developed by Licensee, to use for its own
non-commercial research purposes or grant to other nonprofit institutions for
their non-commercial research purposes.

                          6.3 GOVERNMENTAL INTEREST. Licensee and Scripps
acknowledge that Scripps has received, and expects to continue to receive,
funding from the United States Government in support of Scripps' research
activities. Licensee and Scripps acknowledge and agree that their respective
rights and obligations pursuant to this Agreement shall be subject to Scripps'

                                       10
<PAGE>

obligations and the rights of the United States Government, if any, which arise
or result from Scripps' receipt of research support from the United States
Government, including without limitation, the grant by Scripps to the United
States a non-exclusive, irrevocable, royalty-free license to Scripps Technology
and Scripps Patent Rights licensed hereunder for governmental purposes.

                          6.4 RESERVATION OF RIGHTS. Scripps reserves the right
to use for any non-commercial research purposes and the right to allow other
nonprofit institutions to use for any non-commercial research purposes any
Scripps Technology and Scripps Patent Rights licensed hereunder, without Scripps
or such other institutions being obligated to pay Licensee any royalties or
other compensation.

                          7. CONFIDENTIALITY AND PUBLICATION.

                          7.1 TREATMENT OF CONFIDENTIAL INFORMATION. The parties
agree that during the term of this Agreement, and for a period of three (3)
years after this Agreement terminates, a party receiving Confidential
Information of the other party will (i) maintain in confidence such Confidential
Information to the same extent such party maintains its own proprietary
industrial information, (ii) not disclose such Confidential Information to any
third party without prior written consent of the other party and (iii) not use
such Confidential Information for any purpose except those permitted by this
Agreement.

                          7.2 PUBLICATIONS. Licensee agrees that Scripps shall
have a right to publish in accordance with its general policies.

                          7.3 PUBLICITY. Except as otherwise provided herein or
required by law, no party shall originate any publication, news release or other
public announcement, written or oral, whether in the public press, stockholders'
reports, or otherwise, relating to this Agreement or to any sublicense
hereunder, or to the performance hereunder or any such agreements, without the
prior written approval of the other party, which approval shall not be
unreasonably withheld. Scientific publications published in accordance with
Section 7.2 of this Agreement shall not be construed as publicity governed by
this Section 7.3.

                          8. TERM AND TERMINATION.

                          8.1 TERM. Unless terminated sooner in accordance with
the terms set forth herein, this Agreement, and the license granted hereunder,
shall terminate as provided in Section 2.6 hereof.

                          8.2 TERMINATION UPON DEFAULT. Upon any default by
Licensee under this Agreement, Scripps shall have the right to terminate this
Agreement by giving Licensee a thirty (30) day written notice, specifying in
reasonable detail the nature of such default and of its intent to terminate this
Agreement. Such termination shall occur automatically and immediately after the
expiration of such thirty (30) day period with no further opportunity for cure
by Licensee.

                                       11
<PAGE>

                          Such termination rights shall be in addition to and
not in substitution for any other remedies that may be available to the
non-defaulting party. Termination pursuant to this Section 10.2 shall not
relieve the defaulting party from liability and damages to the other party for
breach of this Agreement. Waiver by either party of a single default or a
succession of defaults shall not deprive such party of any right to terminate
this Agreement arising by reason of any subsequent default.

                          8.3 TERMINATION UPON BANKRUPTCY OR INSOLVENCY. This
Agreement may be terminated by Scripps giving written notice of termination to
Licensee upon the filing of bankruptcy or bankruptcy of Licensee or the
appointment of a receiver of any of Licensee's assets, or the making by Licensee
of any assignment for the benefit of creditors, or the institution of any
proceedings against Licensee under any bankruptcy law. Termination shall be
effective upon the date specified in such notice.

                          8.4 RIGHTS UPON EXPIRATION. Neither party shall have
any further rights or obligations upon the expiration of this Agreement upon its
regularly scheduled expiration date with respect to this Agreement, other than
the obligation of Licensee to make any and all reports and payments for the
final quarter period. Provided, however, that upon such expiration, each party
shall be required to continue to abide by its non-disclosure obligations as
described in Section 7.1. The right of Scripps to audit pursuant to Section
2.10, Licensee's obligation to indemnify Scripps as described in Section 4.3 and
Licensee's grant back obligations under Section 6.2 hereof shall also survive
termination.

                          8.5 RIGHTS UPON TERMINATION. Notwithstanding any other
provision of this Agreement, upon any termination of this Agreement prior to the
regularly scheduled expiration date of this Agreement, the license granted
hereunder shall terminate. Except as otherwise provided in Section 8.6 of this
Agreement with respect to work-in-progress, upon such termination, Licensee
shall have no further right to develop, manufacture or market any Licensed
Product, or to otherwise use any Scripps Patent Rights or any Scripps Technology
not otherwise includable therein. Upon any such termination, Licensee shall
promptly return all materials, samples, documents, information, and other
materials which embody or disclose Scripps Patent Rights or any Scripps
Technology not otherwise includable therein; provided, however, that Licensee
shall not be obligated to provide Scripps with proprietary information which
Licensee can show that it independently developed. Any such termination shall
not relieve either party from any obligations accrued to the date of such
termination. Upon such termination, each party shall be required to abide by its
nondisclosure obligations as described in Section 7.1. The right of Scripps to
audit pursuant to Section 2.10, Licensee's obligation to indemnify Scripps as
described in Section 4.3 and Licensee's grant back obligations under Section 6.2
hereof shall also survive termination.

                          8.6 WORK-IN-PROGRESS. Upon any such early termination
of the license granted hereunder in accordance with this Agreement, Licensee
shall be entitled to finish any work-in-progress and to sell any completed
inventory of a Licensed Product covered by such license which remain on hand as
of the date of the termination, so long as Licensee pays to Scripps the
royalties applicable to said subsequent sales in accordance with the terms and

                                       12
<PAGE>

conditions as set forth in this Agreement, provided that no such sales shall be
permitted after the expiration of six (6) months after the date of termination.

                          9. ASSIGNMENT; SUCCESSORS.

                          9.1 ASSIGNMENT. Any and all assignments of this
Agreement or any rights granted hereunder by Licensee without the prior written
consent of Scripps are void except (i) to an Affiliate of Licensee or (ii) as
expressly permitted hereunder.

                          9.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to
the limitations on assignment herein, this Agreement shall be binding upon and
inure to the benefit of any successors in interest and assigns of Scripps and
Licensee. Any such successor or assignee of Licensee's interest shall expressly
assume in writing the performance of all the terms and conditions of this
Agreement to be performed by Licensee.

                          10. GENERAL PROVISIONS.

                          10.1 INDEPENDENT CONTRACTORS. The relationship between
Scripps and Licensee is that of independent contractors. Scripps and Licensee
are not joint venturers, partners, principal and agent, master and servant,
employer or employee, and have no other relationship other than independent
contracting parties. Scripps and Licensee shall have no power to bind or
obligate each other in any manner, other than as is expressly set forth in this
Agreement.

                          10.2 ARBITRATION. Any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"), and the procedures set forth below. In
the event of any inconsistency between the Rules of AAA and the procedures set
forth below, the procedures set forth below shall control. Judgment upon the
award rendered by the arbitrators may be enforced in any court having
jurisdiction thereof.

                                    10.2.1 LOCATION. The location of the
arbitration shall be in the County of San Diego.

                                    10.2.2 SELECTION OF ARBITRATORS. The
arbitration shall be conducted by a panel of three neutral arbitrators who are
independent and disinterested with respect to the parties, this Agreement, and
the outcome of the arbitration. Each party shall appoint one neutral arbitrator,
and these two arbitrators so selected by the parties shall then select the third
arbitrator. If one party has given written notice to the other party as to the
identity of the arbitrator appointed by the party, and the party thereafter
makes a written demand on the other party to appoint its designated arbitrator
within the next ten days, and the other party fails to appoint its designated
arbitrator within ten days after receiving said written demand, then the
arbitrator who has already been designated shall appoint the other two
arbitrators.

                                    10.2.3 DISCOVERY. Unless the parties
mutually agree in writing to some additional and specific pre-hearing discovery,
the only pre-hearing discovery shall be (a) reasonably limited production of

                                       13
<PAGE>

relevant and non-privileged documents, and (b) the identification of witnesses
to be called at the hearing, which identification shall give the witness's name,
general qualifications and position, and a brief statement as to the general
scope of the testimony to be given by the witness. The arbitrators shall decide
any disputes and shall control the process concerning these pre-hearing
discovery matters. Pursuant to the Rules of AAA, the parties may subpoena
witnesses and documents for presentation at the hearing.

                                    10.2.4 CASE MANAGEMENT. Prompt resolution of
any dispute is important to both parties; and the parties agree that the
arbitration of any dispute shall be conducted expeditiously. The arbitrators are
instructed and directed to assume case management initiative and control over
the arbitration process (including scheduling of events, pre-hearing discovery
and activities, and the conduct of the hearing), in order to complete the
arbitration as expeditiously as is reasonably practical for obtaining a just
resolution of the dispute.

                                    10.2.5 REMEDIES. The arbitrators may grant
any legal or equitable remedy or relief that the arbitrators deem just and
equitable, to the same extent that remedies or relief could be granted by a
state or federal court, provided however, that no punitive damages may be
awarded. No court action may be maintained seeking punitive damages. The
decision of any two of the three arbitrators appointed shall be binding upon the
parties.

                                    10.2.6 EXPENSES. The expenses of the
arbitration, including the arbitrators' fees, expert witness fees, and
attorney's fees, may be awarded to the prevailing party, in the discretion of
the arbitrators, or may be apportioned between the parties in any manner deemed
appropriate by the arbitrators. Unless and until the arbitrators decide that one
party is to pay for all (or a share) of such expenses, both parties shall share
equally in the payment of the arbitrators' fees as and when billed by the
arbitrators.

                                    10.2.7 CONFIDENTIALITY. Except as set forth
below, the parties shall keep confidential the fact of the arbitration, the
dispute being arbitrated, and the decision of the arbitrators. Notwithstanding
the foregoing, the parties may disclose information about the arbitration to
persons who have a need to know, such as directors, trustees, management
employees, witnesses, experts, investors, attorneys, lenders, insurers, and
others who may be directly affected. Additionally, if a party has stock which is
publicly traded, the party may make such disclosures as are required by
applicable securities laws. Further, if a party is expressly asked by a third
party about the dispute or the arbitration, the party may disclose and
acknowledge in general and limited terms that there is a dispute with the other
party which is being (or has been) arbitrated. Once the arbitration award has
become final, if the arbitration award is not promptly satisfied, then these
confidentiality provisions shall no longer be applicable.

                          10.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof. There shall be no amendments or modifications to this
Agreement, except by a written document which is signed by both parties.

                                       14
<PAGE>

                          10.4 CALIFORNIA LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of California without
regard to the conflicts of laws principles thereof.

                          10.5 HEADINGS. The headings for each article and
section in this Agreement have been inserted for convenience of reference only
and are not intended to limit or expand on the meaning of the language contained
in the particular article or section.

                          10.6 SEVERABILITY. Should any one or more of the
provisions of this Agreement be held invalid or unenforceable by a court of
competent jurisdiction, it shall be considered severed from this Agreement and
shall not serve to invalidate the remaining provisions thereof. The parties
shall make a good faith effort to replace any invalid or unenforceable provision
with a valid and enforceable one such that the objectives contemplated by them
when entering this Agreement may be realized.

                          10.7 NO WAIVER. Any delay in enforcing a party's
rights under this Agreement or any waiver as to a particular default or other
matter shall not constitute a waiver of such party's rights to the future
enforcement of its rights under this Agreement, excepting only as to an express
written and signed waiver as to a particular matter for a particular period of
time.

                          10.8 NAME. Whenever there has been an assignment or a
sublicense by Licensee as permitted by this Agreement, the term "Licensee" as
used in this Agreement shall also include and refer to, if appropriate, such
assignee or sublicensee.

                          10.9 ATTORNEYS' FEES. In the event of a dispute
between the parties hereto or in the event of any default hereunder, the party
prevailing in the resolution of any such dispute or default shall be entitled to
recover its reasonable attorneys' fees and other costs incurred in connection
with resolving such dispute or default.

                          10.10 NOTICES. Any notices required by this Agreement
shall be in writing, shall specifically refer to this Agreement and shall be
sent by registered or certified airmail, postage prepaid, or by telefax, telex
or cable, charges prepaid, or by overnight courier, postage prepaid and shall be
forwarded to the respective addresses set forth below unless subsequently
changed by written notice to the other party:

    For Scripps:             The Scripps Research Institute
                                     10550 North Torrey Pines Road, TPC-9
                                     La Jolla, California  92037
                                     Attention: Director, Technology Development
                                     Fax No.:  (858) 784-9910

           with a copy to:   The Scripps Research Institute
                                     10550 North Torrey Pines Road, TPC-8
                                     La Jolla, California  92037
                                     Attention: General Counsel
                                     Fax No.:  (858) 784-9399

    For Licensee:
                             -------------------------------------------
                                     -----------------------------------
                                     -----------------------------------
                                     -----------------------------------
                                     Attention:  _______________________
                                     Fax No.:  _________________________

                                       15
<PAGE>

Notice shall be deemed delivered upon the earlier of (i) when received, (ii)
three (3) days after deposit into the mail, or (iii) the date notice is sent via
telefax, telex or cable, (iv) the day immediately following delivery to
overnight courier (except Sunday and holidays).

                          10.11 COMPLIANCE WITH U.S. LAWS. Nothing contained in
this Agreement shall require or permit Scripps or Licensee to do any act
inconsistent with the requirements of any United States law, regulation or
executive order as the same may be in effect from time to time.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
by their duly authorized representatives as of the date set forth above.

SCRIPPS:                                         LICENSEE:

THE SCRIPPS RESEARCH INSTITUTE                   _______________________________

By:___________________________                   By:____________________________

Title:________________________                   Title:_________________________

                                       16
<PAGE>

                                    EXHIBIT A

                            DISCLOSURE OF TECHNOLOGY

                                       17
<PAGE>

                                    EXHIBIT B

                               FORM OF SUBLICENSE

                  This Sublicense Term Sheet is entered into and made effective
as of ____________________, 20___ by and between ______________________________,
a _______________ located at __________________________________________________
("Licensee") and ______________________________, a _______________ located at
__________________________________________________ ("Sublicensee").

                  GRANT OF SUBLICENSE. Licensee hereby grants to Sublicensee a
sublicense under and on all the same terms and conditions of that certain
License Agreement between Licensee and The Scripps Research Institute, a
California nonprofit public benefit corporation ("Scripps") attached hereto as
Exhibit I (the "Master License Agreement"), except as set forth below:

                                   a. Technology subject to Sublicense:  _______
----------------------------------------------------------------
----------------------------------------------------------------.

                                   b. Term:  ___________________________________
----------------------------------------------------------------
----------------------------------------------------------------.

                                   c. Royalty Payments:  _______________________
----------------------------------------------------------------
----------------------------------------------------------------.

                                   d. Commercial Development Obligations:  _____
----------------------------------------------------------------
----------------------------------------------------------------.

                  By its signature below, Sublicensee agrees to be bound by all
of the terms and conditions of the Master License Agreement, as modified hereby,
for the benefit of Licensee and Scripps.

LICENSEE:                                   SUBLICENSEE:

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

By:___________________________              By:___________________________
Title:________________________              Title:________________________

                                       18<PAGE>

                                                                   Exhibit 10.15

                             [MICROISLET LETTERHEAD]

                                   May 1, 2002

William G. Kachioff
2571 Old Quarry Road
San Diego, California  92108

Dear Bill;

MicroIslet Inc. (the "Company", located at 6540 Lusk Boulevard, Suite C250, San
Diego, CA 92121) is pleased to offer you a position as Vice President, Finance &
Administration and Chief Financial Officer of the Company commencing on May 1,
2002. In this position, you will report to the CEO and President of the company.
Your responsibility will be to develop and implement financial goals and
objectives, which will include financial plans and policies, compliance with the
SECs requirements, and accounting practices. Additional responsibilities include
assisting in business development, and managing relationships with the financial
community. In addition, once we have sufficient resources, you will have the
responsibility for hiring the necessary team in the areas of Finance,
Accounting, Investor Relations, Human Resources and Information Systems.

1.  COMPENSATION & BENEFITS
1.1  SALARY
Your compensation package includes an annual salary (the "Salary") of One
Hundred Thirty-Five Thousand Dollars (US$135,000.00) payable in accordance with
normal payroll policies of the Company. You shall receive a Five Thousand-Dollar
signing bonus. There will be an annual performance review that if Company
business performance permits and subject to approval by the Board of Directors,
will incorporate a merit increase in Salary based on mutually acceptable
performance objectives.

1.2 STOCK OPTIONS
In addition, at time of acceptance of the terms and conditions outlined in this
Contract, the Company shall grant to you, pursuant to the Company's Employee
Stock Option Plan, incentive stock options (the "Options") totaling an aggregate
quantity of 250,000 shares of the common stock of the Company. The exercise
price shall be the price of the Company share at the close of the market on your
hire date specified in this offer letter. All options will vest, in equal
increments; monthly over a thirty-six month period commencing on the date you
became a service provider to the company (2/4/02). In the event of a Change of
Control of the Company the vesting of the shares of common stock of the Company
underlying the Options shall accelerate such that the Options are fully vested
and immediately exercisable for the period of time remaining under each such
option.

<PAGE>

In addition, on the one-year anniversary of your employment commencement,
subject to continued employment and at the discretion of the Compensation
Committee, you will be issued an additional stock option grant of a minimum of
75,000 stock options at the fair market value at the time and, under the same
terms and conditions as above.

1.3 BONUS
You will be eligible for a discretionary annual cash bonus within a Company cash
bonus plan (should the CEO, President, and Board of Directors agree that the
Company's business performance warrants such a distribution).

1.4 BENEFITS
You will be eligible to participate in any benefit plan, offered to the
employees of the company pursuant to the terms and conditions of such plans,
including;
o    Medical, dental, and vision insurance for you and your family.
o    Paid sick leave and paid vacation ("Paid Time Off" or "PTO"). You will
     accrue no less than twenty-five days of PTO per year.

2.  TERMINATION
2.1 WITHOUT CAUSE
If, within the first three years of your employment by the Company (or its
successor following a Change of Control), your employment is involuntarily
terminated without cause (or if you voluntarily terminate your employment for
Good Reason), then upon your furnishing to the Company an executed waiver and
release of claims you will be entitled to the following:
o    The Company shall pay to you, in addition to earned compensation, unused
     PTO and reimbursable expenses through the date of termination, an amount
     equal to three months base Salary and three months of medical, dental, and
     vision insurance for you and your family (the "Severance").
o    You will be provided thirty-six months within which you may exercise that
     portion of your Options that are vested at the date of termination. All
     remaining Options will be terminated and there will be no further vesting,
     unless the Board of Director approves to extend the vesting in
     consideration for any consultation services provided by you. In the event
     of a Change of Control, you agree that the Company can elect to immediately
     purchase your Options at the recognized market value of the shares.
o    In the event that you elect continued health coverage under COBRA, the
     Company will reimburse you for the same portion of your COBRA health
     insurance premium that it paid during your employment up until the earlier
     of either (a) twelve (12) months from the date of termination, or (b) the
     date on which you begin full-time employment with another company or
     business entity. You will be responsible for the same portion of the COBRA
     health insurance premium that is commensurate with the portion of the
     health insurance premium that you paid during your employment with the
     Company.

2.2 FOR CAUSE
In the event that you are terminated for Cause, Salary and Benefits will cease
immediately. The Options shall terminate and expire immediately and you shall
not exercise any portion of the Options.

<PAGE>

2.3 VOLUNTARY TERMINATION
In the event that you voluntarily leave the employment of the Company, you agree
to provide the Company with 30 days advance written notice. The vesting of the
shares of common stock of the Company underlying the Options will cease on the
last day of your employment. You will be able to exercise the vested portion of
the Options for a period not to exceed the earlier of (a) ninety (90) days
following the last date of employment with the Company and (b) the expiration
date of the Options.

2.4 DEATH OR DISABILITY
The Company will maintain travel and/or life insurance that cover death or
disability on Company business, and will include you under its protection. In
the event that your employment terminates due to death or disability, the
vesting of the shares of common stock of the Company underlying the Options will
cease and you or your Estate will be able to exercise the vested portion of the
Options for a period not to exceed thirty-six (36) months following the last
date of employment with the Company. In the event of a Change of Control, you
and your Estate agree that the Company can elect to immediately purchase your
Options at the recognized market value of the shares.

3. PARACHUTE PAYMENTS
If any Benefit received or to be received by you pursuant to this Agreement
would constitute a "parachute payment" within the meaning of Section 280G of the
Code and but for this paragraph, be subject to the Excise Tax, then such Benefit
shall be reduced to the extent necessary so that no portion of the Benefit would
be subject to the Excise Tax, as determined in good faith by the Company;
provided, however, that if, in the absence of any such reduction (or after such
reduction), you believe that the Benefit or any portion thereof (as reduced, if
applicable) would be subject to the Excise Tax, the Benefit shall be reduced (or
further reduced) to the extent determined by you in your discretion so that the
Excise Tax would not apply. If, notwithstanding any such reduction (or in the
absence of such reduction), the Internal Revenue Service determines that you are
liable for the Excise Tax as a result of the Benefit, than you shall be
obligated to return to the Company, within thirty days (30) of such
determination by the Internal Revenue Service, a portion of the Benefit
sufficient such that none of the Benefit retained by you constitutes a
"parachute payment" within the meaning of Code Section 280G that is subject to
the Excise Tax.

4. ARBITRATION
By signing and accepting the terms of this offer letter; you understand and
agree that your employment with the Company is at will and that subject to the
provisions of this offer letter, either you or the Company can terminate the
employment relationship at any time, for any reason, either with or without
cause. You also understand and agree that any dispute arising out of or relating
to this offer letter or to your employment by the Company shall be submitted to
arbitration in San Diego County, California, before a sole arbitrator (the
"Arbitrator") selected from the American Arbitration Association ("AAA"), and
shall be conducted in accordance with the AAA's Labor Arbitration Rules
(including the Expedited Labor Arbitration Procedures) and the provisions of
California Code of Civil Procedure Section 1280 et seq. as the exclusive remedy
of such dispute; provided, however, that provisional injunctive relief may, but
need not, be sought in a court of law while arbitration proceedings are pending,
and any provisional injunctive relief granted by such court shall remain
effective until the matter is finally determined by the Arbitrator. Final
resolution of any dispute through arbitration may include permanent injunctive
relief or specific performance or both, and the Arbitrator is hereby empowered
to award such relief. Any award or relief granted by the Arbitrator hereunder
shall be final and binding on the parties hereto and may be enforced by any
court of competent jurisdiction. You and the Company understand and agree that
they are hereby waiving any rights to trial by jury in any action, proceeding or
counterclaim brought by either of the parties against the other in connection
with any matter whatsoever arising out of or in any way connected with this
offer letter.

<PAGE>

5. CONFIDENTIALITY
You further understand and agree that you will be required to sign the Company's
Trade Secret and Confidentiality Agreement, and the Company's Non-Solicitation
Agreement.

6. INDEMNIFICATION
Thee Company will maintain adequate Directors and Officers (D&O) insurance and
will include you under its protection

7. ENTIRE AGREEMENT AND AMENDMENTS.
This offer letter and the Company's Trade Secret and Confidentiality Agreement
and Non-Solicitation Agreement constitute the entire agreement between you and
the Company pertaining to the subject matter contained therein and supersede all
prior agreements, representations, and understandings of the parties. No
agreement between you and the Company, nor any modification or amendment, shall
be valid unless in writing and signed by you and the Company.

Bill, MicroIslet Inc. looks forward to working with you and having you join the
team. If the foregoing is acceptable to you, please sign and return the letter
to me at the Company.

Very truly yours,

/s/ John F. Steel IV

John F. Steel IV
Chairman and Chief Executive Officer

Accepted By: /s/ William G. Kachioff              Date: 4/30/02
             ------------------------------             -------
             William G. Kachioff

<PAGE>

DEFINITIONS

For the purposes of this Agreement, the following terms will have meanings set
forth below:

o    "Salary" means your annual paid salary in consideration for your service
     during the last twelve (12) months, or if twelve (12) months have not yet
     been completed, then your last paycheck, annualized.

o    "Cause" means the termination of your employment by the Company for the
     following, as determined by a majority vote of the Executive Committee:
     (a)  The habitual or willful neglect of your duties or breach of your
          employment terms or fiduciary duties to the Company that, if capable
          of being cured, remains uncured within thirty (30) days of written
          notice of such neglect or breach from the Executive Committee.
     (b)  An intentional or grossly negligent act(s) by you (other than act(s)
          specifically directed by the Board of Directors or Executive
          Committee) taken in bad faith that is materially detrimental to or may
          reasonably came damage or harm the Company or any of its employees;
     (c)  A willful failure or refusal to perform your duties that remains
          uncured by you within thirty (30) days of written notice of such
          failure or refusal from the Executive Committee; or
     (d)  If you are convicted or plead guilty or no contest to theft, fraud,
          embezzlement or a felony in a court administered in the United States
          of America.

o    "Good Reason" means:
     (a)  A material reduction in your Salary without your written consent; or
     (b)  A material reduction in your responsibilities, duties, position, or
          authority at the Company; or
     (c)  The Company asking you to perform any act which is illegal; or

    (d)  A breach by the Company or any successor to the Company of any
          material provisions to this offer letter that remains uncured within
          thirty (30) days of written notice from you of such neglect or breach.

o    "Change in Control" of the Company will be deemed to have occurred if and
     when:
     (a)  A sale, lease or transfer of all, or substantially all, of the stock
          or assets of the Company in a single transaction or series of related
          transactions; or
     (b)  Consummation of any consolidation or merger of the Company into, or
          with, another unrelated third party entity, in which the Company is
          not the surviving corporation or pursuant to which shares of the
          Company's common stock would be converted into cash, securities or
          other property, other than a merger of the Company in which the
          holders of the Company's common stock immediately prior to the merger
          have the same proportionate ownership of common stock of the surviving
          corporation immediately after the merger; or
     (c)  The business (or businesses) of the Company for which your services
          are principally performed are disposed of by the Company pursuant to a
          partial or complete liquidation of the Company.

<PAGE>

     In no event shall a Change in Control be deemed to have occur upon a public
     offering of the Company's Common Stock pursuant to a registration statement
     under the Securities Act of 1933, as amended.

     o    "Excise Tax" means the excise tax imposed by Section 4999 of the Code.

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