Document:

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                 CALIFORNIA FEDERAL BANK, A FEDERAL SAVINGS BANK
                           1998 CHANGE OF CONTROL PLAN

                                    ARTICLE I
                                     PURPOSE

     The purpose of the Plan is to recognize  the  contributions  to the success
and  profitability  of  CALIFORNIA  FEDERAL  BANK,  A FEDERAL  SAVINGS BANK (the
"Bank")  provided by officers of the Bank through the payment of certain  future
compensation (as described  herein) that will  (a) increase the interest of such
officers in the Bank's  welfare and (b) furnish an incentive to such officers to
continue their services for the Bank.  This Plan shall be  interpreted,  for all
purposes,  in a manner  that  will  effectuate  the  purposes,  objectives,  and
intentions  set  forth in this  Article.  The  substance  of this  Plan has been
adopted by the Compensation Committee of the Board of Directors of the Bank.

                                   ARTICLE II
                                   DEFINITIONS

     For  purposes of this Plan,  unless the  context  requires  otherwise,  the
following terms shall have the meanings indicated:

     "Bank" means California Federal Bank, A Federal Savings Bank.

     "Bank Board" means the Board of Directors of the Bank.

     "Business Combination"  shall  have  the  meaning  set  forth  within  the
definition of "Change of Control."

     "Cause"  shall mean gross  neglect by a  Participant  of the  Participant's
duties to the Bank,  conviction of the Participant of any felony,  conviction of
the  Participant  of any lesser crime or offense  involving  the property of the
Bank  or  any of its  subsidiaries  or  affiliates,  willful  misconduct  by the
Participant in connection  with the  performance of any material  portion of the
Participant's  duties to the Bank,  breach by the  Participant  of any  material
provision of the Bank's employment policies including the Code of Ethics, or any
other conduct on the part of the Participant  which would make the Participant's
continued employment by the Bank materially prejudicial to the best interests of
the Bank. "Cause" also shall include the bases set forth in the provisions of 12
C.F.R.  Section  563.39(b)(1) or successor  regulation defining  termination for
cause in employment agreements for employees of a savings association.

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     "Change of Control Event" means the occurrence of any of the following:

     (a) The acquisition by any individual,  entity or group (within the meaning
of  Section 13(d)(3)  or 14(d)(2) of the  Securities  Exchange  Act of 1934,  as
amended) (a "Person") of beneficial  ownership (within the meaning of Rule 13d-3
promulgated  under the  Securities  Exchange Act of 1934,  as amended) of 20% or
more of either (1) the then-outstanding shares of common stock (the "Outstanding
Company Common  Stock") of Golden State Bancorp Inc. (the  "Company") or (2) the
combined voting power of the  then-outstanding  voting securities of the Company
entitled to vote  generally  in the  election  of  directors  (the  "Outstanding
Company  Voting  Securities");  provided,  however,  that for  purposes  of this
paragraph (a) the following  acquisitions shall not constitute,  or be deemed to
cause, a Change of Control Event:  (i) any increase in such percentage ownership
of a Person  to 20% or more  resulting  solely  from any  acquisition  of shares
directly from the Company or any acquisition of shares by the Company, provided,
however,  that any subsequent  acquisitions  of shares by such Person that would
add,  in the  aggregate,  2% or more  (measured  as of the  date  of  each  such
subsequent  acquisition)  to such Person's  beneficial  ownership of Outstanding
Company Common Stock or Outstanding Company Voting Securities shall be deemed to
constitute  a Change of Control  Event,  (ii) any  acquisition  by any  employee
benefit plan (or related  trust)  sponsored or  maintained by the Company or any
corporation  controlled  by the  Company;  (iii) any  acquisition  by  Ronald O.
Perelman,  Gerald J.  Ford or an entity controlled by either or both of them; or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2) and (3) of paragraph (c) below; or

     (b)  Individuals  who,  as of the  date  hereof,  constitute  the  Board of
Directors  of the  Company  (the  "Incumbent Board")  cease  for any  reason to
constitute  at least a  majority  of the  Board  of  Directors  of the  Company;
PROVIDED, HOWEVER,  that any individual  becoming a director  subsequent to the
date  hereof  whose  election,  or  nomination  for  election  by the  Company's
stockholders,  was  approved by a vote of at least a majority  of the  directors
then  comprising  the  Incumbent  Board  shall  be  considered  as  though  such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose,  any such  individual  whose  initial  assumption of office occurs as a
result of an actual or threatened  election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents,  by or on behalf of a person  other than the Board of Directors of the
Company; or

     (c)  Consummation of a  reorganization,  merger or consolidation or sale or
other  disposition of all or  substantially  all of the assets of the Company (a
"Business   Combination"),   in  each  case,  unless,  following  such  Business
Combination,  (1) all or  substantially  all of the individuals and entities who
were the beneficial owners, respectively, of the then Outstanding Company Common
Stock and  Outstanding  Company  Voting  Securities,  immediately  prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then-

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outstanding  shares  of  common  stock  and the  combined  voting  power  of the
then-outstanding voting securities entitled to vote generally in the election of
directors,  as the case may be, of the corporation  resulting from such Business
Combination (including,  without limitation,  a corporation which as a result of
such transaction  owns the Company or all or substantially  all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same  proportions  as  their  ownership,  immediately  prior  to  such  Business
Combination  of the  Outstanding  Company Common Stock and  Outstanding  Company
Voting Securities,  as the case may be, (2) no Person (excluding any corporation
resulting  from such  Business  Combination  or any  employee  benefit  plan (or
related  trust)  of the  Company  or of such  corporation  resulting  from  such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively,  the  then-outstanding  shares of common stock of the  corporation
resulting  from such Business  Combination  or the combined  voting power of the
then-outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (3) individuals who
were on the  Incumbent  board  cease to  constitute  at least a majority  of the
members of the board of directors of the corporation resulting from the Business
Combination;   provided,  however,  that  any  individual  becoming  a  director
subsequent to the date hereof whose election,  or nomination for election by the
Company's  stockholders,  was  approved  by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose,  any such  individual  whose  initial  assumption of office occurs as a
result of an actual or threatened  election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents,  by or on behalf of a person  other than the Board of Directors of the
Company; or

Notwithstanding the foregoing, the occurrence of an event described in the above
paragraphs  (a) through  (c),  inclusive,  shall not be deemed to  constitute  a
Change of Control Event if,  following the  occurrence of such event,  Gerald J.
Ford  continues  to serve as the  Chairman  and Chief  Executive  Officer of the
Company (in the case of a Business Combination, of the surviving company in such
Business  Combination).  However,  if a Change of  Control  Event does not occur
solely  because of the  operation of the  preceding  sentence,  then a Change of
Control Event shall occur upon the subsequent  death or permanent  disability of
Gerald J. Ford.

     (d) Approval by the  stockholders of the Company of a complete  liquidation
or dissolution of the Company.

"Code" shall have the meaning set forth in Section 6.13.

"Committee" shall have the meaning set forth in Article III.

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     "Company" shall have the meaning set forth within the definition of "Change
of Control."

     "Disability"  shall mean that a  Participant  has  suffered  a physical  or
mental disability, whether total or partial, such that the Participant is unable
to  perform  the  Participant's  services  to the bank  for (i) a period  of six
consecutive months or (ii) for shorter periods aggregating six months during any
twelve month period.

     "Excess Amount" shall have the meaning set forth in Section 6.13.

     "Incumbent Board" shall have the meaning set forth within the definition of
"Change of Control."

     "Outstanding  Company Common Stock" shall have the meaning set forth within
the definition of "Change of Control."

     "Outstanding  Company Voting  Securities"  shall have the meaning set forth
within the definition of "Change of Control."

     "Participant" shall have the meaning set forth in Article IV.

     "Payment  Date" shall mean the earlier to occur of (a) the date of a Change
of Control Event or (b) December 31, 2002.

     "Person"  shall have the meaning set forth within the definition of "Change
of Control."

     "Plan" means this  California  Federal Bank, A Federal  Savings Bank,  1998
Change of Control Plan, as amended from time to time.

     "Plan Payment" shall mean for a Participant  the product of (a) 125% of the
Participant's  base salary as of December  31,  1998,  as set forth on Exhibit A
hereto  opposite such  Participant's  name under the heading "Base Award Amount"
multiplied by (b)such Participant's Vested Percentage as of the Payment Date.

     "Service Period" shall have the meaning set forth in Section 5.2.

     "Vested Percentage" means the quotient of the Participant's  Service Period
divided by 60.

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                                   ARTICLE III
                                 ADMINISTRATION

     The Plan shall be  administered by the  Compensation  Committee of the Bank
Board (the "Committee").  Without limitation, the Committee shall: (i) interpret
the Plan; (ii) prescribe, amend, and rescind any rules and regulations necessary
or  appropriate  for the  administration  of the Plan; and (iii) make such other
determinations  and take such other action as it deems  necessary or  advisable.
Any  interpretation,  determination,  or  other  action  made  or  taken  by the
Committee shall be final, binding, and conclusive on all interested parties.

                                   ARTICLE IV
                                  PARTICIPANTS

     The Board has  selected  the  individuals  listed  on  Exhibit A  to be the
Participants in the Plan.  "Participant"  shall mean the  individuals  listed on
Exhibit A hereto;  provided,  however, that an officer whose employment with the
Bank is  terminated  by the Bank for  Cause or by the  Participant  for a reason
other than death or  Disability,  shall  cease to be a  "Participant"  hereunder
simultaneously  with such  termination.  A Participant whose employment with the
Bank is  terminated  by the  Bank  for a  reason  other  than  for  Cause or who
terminates his or her employment due to Disability shall nonetheless continue to
be a  Participant  hereunder.  If a  Participant's  employment  with the Bank is
terminated  due to the  Participant's  death,  then the  person or  entity  that
succeeds  to the  Participant's  interest  under the Plan shall be  entitled  to
receive  any Plan  Payment  which the  Participant  would have  received  if the
Participant had been employed by the Bank on the Payment Date.

                                    ARTICLE V
                                  PLAN PAYMENTS

     5.1 Payment of Plan  Payments.  On the Payment Date,  the Bank shall make a
Plan  Payment  to each  person  who then is a  Participant  in the Plan and,  if
applicable,   to  the  person  or  entity  that  has  succeeded  to  a  deceased
Participant's  interest  under the  Plan.  Plan  Payments  shall be paid by Bank
check,  which need not be a certified check or a cashier's check. The Bank shall
deduct or withhold from any Plan Payment made  hereunder all federal,  state and
local income taxes, Social Security,  FICA, FUTA and other amounts that the Bank
determines are required by law to be withheld.  Simultaneously  with or prior to
the payment of the Plan Payments,  the President and Chief Operating  Officer or
other  appropriate  officer of the Bank  shall  deliver  to each  Participant  a
written notice setting forth the calculation of such Participant's Plan Payment.

     5.2 Service Period.  Set forth opposite each initial  Participant's name on
Exhibit A hereto  under the  heading  "First  Month of Service" is the month and
year during which the  Participant  entered  into his or her current  employment
relationship  with the  Bank  (as  owned  by  First  Nationwide  Holdings  Inc.,
effective  January 3, 1997) or First Madison Bank,  FSB; First

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Gibraltar Bank, FSB; or First  Nationwide Bank, A Federal Savings Bank (as owned
by First Nationwide  Holdings Inc.,  effective October 1, 1994). For purposes of
determining  a  Participant's  Vested  Percentage,  the  Participant's  "Service
Period"  shall be the total number of months  beginning  with the  Participant's
First Month of Service and ending  with the last day of the month  during  which
the Payment Date occurs  (inclusive);  provided,  however,  the maximum possible
Service Period for purposes of such determination shall be 60 months.

                                   ARTICLE VI
                            MISCELLANEOUS PROVISIONS

     6.1  Non-Assignability.  A Participant's right to a Plan Payment may not be
transferred  or  assigned  other  than  by will or by the  laws of  descent  and
distribution, in all cases subject to the terms and provisions hereof.

     6.2 No Right To Continue In  Employment.  Nothing in the Plan  confers upon
any employee the right to continue in the employ of the Bank or interferes  with
or restricts  in any way the right of the Bank to discharge  any employee at any
time (subject to any contractual rights of such employee).

     6.3 Indemnification Of Board and Committee.  No member of the Bank Board or
the  Committee,  nor any officer or employee of the Bank acting on behalf of the
Bank  Board  or   Committee   shall  be   personally   liable  for  any  action,
determination, or interpretation taken or made in good faith with respect to the
Plan,  and all members of the Bank Board or the  Committee  and each  officer or
employee of the Bank acting on their behalf  shall,  to the extent  permitted by
law,  be fully  indemnified  and  protected  by the Bank in  respect of any such
action, determination or interpretation.

     6.4 Plan Funding.  The Plan shall at all times be entirely  unfunded and no
provision  shall at any time be made with respect to  segregating  assets of the
Bank for payment of any amounts  hereunder.  No  Participant or any other person
shall have any  interest in any  particular  assets of the Bank by reason of the
right to receive a Plan Payment under the Plan. Participants shall have only the
rights  of a  general  unsecured  creditor  of the Bank and only at such time or
times when such rights may arise in accordance with the terms hereof.

     6.5 Governing Law. This Plan shall be construed in accordance with the laws
of the State of California and the rights and  obligations  created hereby shall
be governed by the laws of the State of California.

     6.6  Binding  Effect.  This  Plan  shall be  binding  upon and inure to the
benefit of the Bank, its successors and assigns, and the Participants, and their
respective heirs and personal representatives.

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     6.7  Construction  of  Plan.  The  captions  used  in  this  Plan  are  for
convenience only and shall not be construed in interpreting  the Plan.  Whenever
the context so requires,  the  masculine  shall include the feminine and neuter,
and the singular shall also include the plural, and conversely.

     6.8  Integrated   Plan.  This  Plan  constitutes  the  final  and  complete
expression of the Bank's agreement with respect to the subject matter hereof.

     6.9 Effective  Date and  Termination  Date.  The effective date of the Plan
shall be  December 31,  1998.  The  Termination  Date of this Plan  shall be the
earlier to occur of (i) the date on which the Bank Board determines to terminate
the Plan pursuant to Section 6.11 or (ii) the Payment Date.

     6.10 Compliance with Other Laws and Regulations.  The Bank Board may obtain
such agreements or undertakings, if any, as the Bank Board may deem necessary or
advisable to assure  compliance  with any law or regulation of any  governmental
authority or any national securities exchange or other forum in which the Bank's
common stock is traded. The Plan and any Plan Payment hereunder shall be subject
to all  applicable  federal and state laws,  rules and  regulations  and to such
approvals by any government or regulatory agency as may be required.

     6.11  Amendment;  Termination.  The Bank  Board  may  terminate  the  Plan;
provided, however, that on the effective date of such termination the Bank shall
pay to each  Participant  (and, if applicable,  to the person or entity that has
succeeded to a deceased  Participant's  interest  under the Plan) the amount set
forth on Exhibit A  hereto  opposite such  Participant's  name under the heading
"Base Award Amount," without regard to such  Participant's  Vested Percentage or
Service  Period.  The Bank Board may amend this Plan  without the consent of the
Participants  if such  amendment  will not  reduce  the amount to be paid to any
Participant  or  otherwise  materially  affect  the  rights or  benefits  of any
Participant.  Notwithstanding the foregoing,  the Bank Board may amend this Plan
to delete Section 6.13 without obtaining the consent of the Participants.

     6.12 Plan Subject to Applicable  Law. Any payments made to any  Participant
pursuant to this Plan, or otherwise,  are subject to and conditioned  upon their
compliance  with 12  U.S.C.  Section  1828(k)  and any  regulations  promulgated
thereunder.

     6.13 Limitation on Payments.

          (a)  Notwithstanding  anything  in this Plan to the  contrary,  in the
     event it shall be  determined  that any payment or  distribution  made,  or
     benefit  provided,  by the Bank or the Company to or for the benefit of any
     Participant  (whether paid or payable or  distributed or  distributable  or
     provided  pursuant to the terms  hereof or  otherwise)  would  constitute a
     "parachute payment" as defined in Section 280G of the Internal Revenue Code
     of 1986, as amended (the "Code"), then the Plan Payment payable pursuant to
     such  Participant  pursuant  to this  Plan  shall  be  reduced  so that the
     aggregate  present value of all

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     payments  in the nature of  compensation  to (or for the  benefit  of) such
     Participant which are contingent on a change of control (as defined in Code
     Section  280G(b)(2)(A))  is One Dollar  ($1.00)  less than the amount which
     such  Participant  could receive without being  considered to have received
     any  parachute  payment  (the  amount  of this  reduction  in the  lump sum
     severance  payment  is  referred  to herein as the  "Excess  Amount").  The
     determination of the amount of any reduction required by this Section shall
     be made by an independent  accounting firm selected by the Bank Board,  and
     such determination shall be conclusive and binding on such Participant.

          (b)  Notwithstanding the provisions of item (a) of this Section, if it
     is established  pursuant to a final determination of a court or an Internal
     Revenue  Service   proceeding  which  has  been  finally  and  conclusively
     resolved,  that an Excess Amount was received  hereunder by a  Participant,
     then such Excess  Amount  shall be deemed for all  purposes to be a loan to
     such  Participant  made on the date the  Participant  received  the  Excess
     Amount and such  Participant  shall repay the Excess  Amount to the Bank on
     demand (but no less than ten (10) days after written  demand is received by
     such  Participant)  together  with  interest  on the  Excess  Amount at the
     "applicable  Federal rate" (as defined in Section 1274(d) of the Code) from
     the date of the Participant's  receipt of such Excess Amount until the date
     of such repayment.

     IN  WITNESS  WHEREOF,  this  Plan has been  executed  as of the 25th day of
March, 1999.

                                       CALIFORNIA FEDERAL BANK
                                       A FEDERAL SAVINGS BANK

                                       By:      /s/ Gerald J. Ford
                                       -----------------------------------------
                                       Name: Gerald J. Ford
                                       Title: Chairman & Chief Executive Officer

                                       8<PAGE>

                                                                EXHIBIT 10.27

                       LICENSE AND DEVELOPMENT AGREEMENT

This Agreement is between PROTEIN POLYMERS TECHNOLOGIES, INC., a Delaware
corporation, having its place of business at 10655 Sorrento Valley Road, San
Diego, California 92121 (hereinafter referred to as "PPTI"), and
PROSPECTIVEPIERCING LIMITED, to be known as FEMCARE UROLOGY LIMITED, a company
incorporated under the laws of England and Wales whose registered office is at
St. Peter Street, Nottingham NG7 3EN, England (hereinafter referred to as
"FEMCARE").

                              W I T N E S S E T H:

WHEREAS, PPTI is developing and intends to commercialize the Product; and

WHEREAS, FEMCARE, has experience and capability in obtaining governmental
approvals in the Territories for medical devices and in marketing such products
throughout the Territories; and

WHEREAS, FEMCARE, desires to purchase from PPTI an exclusive license to market
the Product in the Territories solely for use in the Field; and

WHEREAS, PPTI desires to sell to FEMCARE an exclusive license to market the
Product in the Territories in the Field, subject to the terms and conditions of
this Agreement; and

WHEREAS, FEMCARE desires to engage PPTI to manufacture and supply to FEMCARE,
the Product for Commercialization in the Territories in the Field;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, PPTI
and FEMCARE agree as follows:

1.  DEFINITIONS

In this Agreement (including the recitals) the following expressions shall have
the following meanings unless the context otherwise requires:

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"Affiliate" shall mean, in relation to either party, (a) any company,
partnership, limited liability company, or other entity in which the relevant
party directly or indirectly holds 30% or more of the voting interests, (b) any
company which holds directly or indirectly 30% or more of the voting stock or
shares of the relevant party, (c) any other company, partnership, limited
liability company, or other entity in which 30% or more of the voting interests
is directly or indirectly held by any company described in clause (b), or (d)
any company partnership, limited liability company, or other entity in which the
relevant party directly or indirectly holds less than 30% of the voting
interests but has management control of such company in that it has the ability
to appoint or remove the majority of the directors or managers of such company.

"Calendar Quarter" shall mean the usual and customary FEMCARE calendar quarters,
the first quarter being the months of January, February and March, the second
quarter being the months of April, May and June, the third quarter being the
months of July, August and September, and the fourth quarter being the months of
October, November and December.

"Clinical Efficacy Trials" shall mean trials of the Product on sufficient
numbers of patients to establish the safety and efficacy of the Product in order
to assist the parties in obtaining Regulatory Approval for the manufacture and
Commercialization of Product.

"Clinical Safety Trials" shall mean trials for the first introduction into
humans of the Product with the purpose of establishing its safety sufficiently
to proceed to Clinical Efficacy Trials.

"Commercialization" shall mean the continuous marketing, use, offer for sale,
sale and supply of the Product to third parties, and "Commercialized" shall be
construed accordingly.

"Competitive Product" shall mean Contigen, Macroplastique, Durasphere and
similar injectable or inplantable products for the treatment of stress urinary
incontinence which compete with the Product in the Territories in the Field.

                                       2
<PAGE>

"Copyright" shall mean all copyright and rights in the nature of copyright to
which PPTI or its Subsidiaries may now or may subsequently become entitled in or
in respect of all drawings and other documents, recordings in any form and/or
other materials bearing or embodying any part of the Know-How or the Regulatory
Information including without limitation any such materials consisting of or
containing software or databases.

"Effective Date" shall mean January 26, 2000.

"Existing IDE" shall mean the investigational device exemption application filed
with the FDA by PPTI in respect to the Product: ***.

"FDA" shall mean the United States Food and Drug Administration.

"Field" shall mean soft tissue augmentation in the genitourinary tract to treat
urological symptoms of disease, including the delivery in any manner of
lidocaine or an equivalent local anesthetic to ameliorate pain associated with
such treatment, but excluding all other drug delivery (except as aforesaid),
birth control, cosmetic tissue augmentation, and adhesive and sealant
applications and all other uses of soft tissue augmentation.

"IDE" shall mean an investigational device exemption application filed with the
FDA by PPTI.

"Intellectual Property" shall mean Patents, Know-How and Copyright.

"Know-How" shall mean all information, data or experience whether patentable or
not, useful in the Field in the Territories owned or controlled by PPTI or its
Subsidiaries at any time prior to or during the term of this Agreement,
including without limitation, processes, techniques, methods, products,
apparatuses, cultures, other biological materials and other materials and
compositions, operating instructions, machinery designs, raw material or

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       3
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product specifications, drawings, blue prints, and any other technical and
commercial information relating to research, design, development, manufacture,
assembly, use or sale of the Product which are or may be useful in the Field,
but excluding PMA Know-How and information and data that cannot be disclosed
without PPTI or its Subsidiaries being in breach of a bona-fide confidentiality
obligation to a third party.

"Joint Product" shall mean a product whose manufacture, marketing, use or sale
would infringe a Valid Claim of a Joint Invention.

"Marketing Year" shall mean each period of 12 months calculated from the  first
day of the month following the date on which FEMCARE shall first sell Products
to independent third parties on a commercial basis in any of the Territories.
The first Marketing Year shall include sales made in the month preceding the
commencement date of the first Marketing Year.

"Net Sales" shall, subject to the two provisos to this definition, mean:

     (a)   the invoiced price of Product upon the sale by a party or its
           Affiliates and distributors of Product to third parties (other than
           Affiliates);

     (b)   subject to paragraph (c) of this definition the fair market value of
           sales or transfers of Product from a party to Affiliates, where the
           fair market value shall be determined from the sales of similar
           volumes of Product in the same Territory (or if none a comparable
           Territory) to third parties (other than Affiliates); or

     (c)   invoiced price of Product upon the sale by a party to an Affiliate of
           Product which is to be used primarily for performing clinical trials
           or testing to obtain Regulatory Approval in the United States or the
           Territories, in each case less the following amounts:

           (i)     all normal discounts of any type or nature (e.g., cash
                   discounts, volume discounts, credits and rebates if not
                   already reflected in the invoiced price);

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<PAGE>

           (ii)    credits or allowances actually granted upon claims or returns
                   regardless of the party requesting the return;

           (iii)   provided the amounts are separately charged upon the invoice
                   and not already excluded from Net Sales all proper deductions
                   for any costs of packaging, insurance, carriage, freight,
                   value added tax or other sales tax, import duties or similar
                   government levies or export insurance cost;

           each determined in accordance with such party's accounting principles
           from time to time or if none are applicable generally accepted
           accounting principles in the United Kingdom or United States, as the
           case may be, from time to time consistently applied.

           Provided that if Product is sold by a party in a Territory in
           combination with another product sold by that party and the Product
           is not separately invoiced or priced on the relevant invoice for the
           Product and the other product, Net Sales for such Product in a
           Calendar Quarter will be calculated by multiplying actual Net Sales
           of the Product and other product in the Territory in such Calendar
           Quarter by the fraction A/(A+B) where A is the average invoiced price
           (less the amounts referred to in (iii) of this definition) of Product
           when sold separately by such party is such Territory in such Calendar
           Quarter to third parties (other than Affiliates) and B is the invoice
           price (less the amounts referred to in (iii) of this definition) of
           the other product when sold separately by such party in such
           Territory to such third parties (other than Affiliates) in such
           Territory in such Calendar Quarter.

           Provided further that if in the circumstances described in the
           preceding proviso either the Product or the other product is not sold
           separately in a Territory in a Calendar Quarter by party, Net Sales
           for Product shall be calculated by multiplying actual Net Sales of
           the Product and other product by the fraction D/E where D is a
           party's direct cost of Product, and E shall be a party's aggregate
           direct cost of the Product and other product. For purposes of the
           foregoing, if the party is FEMCARE, party shall mean FEMCARE and its
           Affiliates and if the party is PPTI, party shall mean PPTI and its
           Subsidiaries (and the term "Subsidiaries" (and the term
           "Subsidiaries" shall be substituted for "Affiliates").

                                       5
<PAGE>

"Net Selling Price" shall mean the same as Net Sales save that Joint Product or
Joint

Products shall be substituted for "Product" or "Products" (as the case may be)
wherever the latter appear.

"Patent(s)" shall mean:

     (a)   any and all the patents and applications for patents that are
           identified in Schedule A, any foreign counterparts thereof, all
           continuations, continuations-in-part, divisions and renewals thereof,
           all patent supplementary protection certificates and similar rights
           that are based on or derive priority from any of the foregoing or
           which may be granted thereon, and all reissues, re-examinations,
           extensions, patents of addition and patent of importation thereof;

     (b)   any and all patent applications by PPTI related to or based on any
           Know-How related to the Product or Product Improvements, if
           applicable, that is developed by PPTI during the term of this
           Agreement, all continuations, continuations-in-part or divisions of
           any such applications, any patents which shall issue based on such
           applications, continuations, continuations-in-part or divisions and
           any and all patents, patent supplementary protection certificates and
           similar rights that are based upon or derive priority from any of the
           foregoing or which may be granted thereon and all reissues or
           extensions thereof or patents of addition thereto but not including
           any PMA Know-How developed by PPTI after completion of its
           obligations under Article 3.01; and

     (c)   all such patent applications, patents Certificates and rights, a
           Valid Claim of which would be infringed by the manufacture marketing
           use or sale of the Product (but for the license granted herein).

                                       6
<PAGE>

"Performance Benchmarks" shall mean the goals set forth on Schedule B as may
from time to time be modified by the Advisory Board.

"PMA" shall mean a premarket approval application filed with the FDA, or if a
PMA is not the appropriate filing, then the suitable filing to obtain Regulatory
Approval in the United States.

"PMA Know-How" shall mean any Know-How that would be embodied in Product
Improvements.

"Product(s)" shall mean Polymer 47K Urethral Bulking Agent as currently approved
by the FDA under IDE *** (whether or not including or injecting lidocaine or an
equivalent local anaesthetic) and any modifications made thereto as part of its
PMA approval and any amendment thereto.

"Product Improvements" shall mean any improvement, enhancement or modification
of or alternative or substitute for the Product proposed to be developed by PPTI
or its Subsidiaries that if made, would require the filing of a new IDE or PMA
or the like with the FDA in addition to the Existing IDE and any PMA to be
obtained in respect to the Product pursuant to the provisions of Article 3.

"Regulatory Approval" shall mean with respect to any country, filing for and
receipt of all regulatory agency or other registrations and approvals required
in such country in respect of Product for any purpose specified in this
Agreement of if no purpose is specified to enable the Product to be manufactured
and for Commercialization to take place in such country.

"Regulatory Information" shall mean all information, correspondence, reports,
documentation and approvals (however stored) in the possession or under the
control of a party in respect of any Regulatory Approvals required for the
Product in the United States or any Territory.

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       7
<PAGE>

"Subsidiary" shall mean a corporation, limited liability company or partnership
of which a party holds 50% or more of the voting or economic interest.

"Supply Agreement" shall mean the Supply Agreement to be entered into between
PPTI and FEMCARE substantially in form attached as Schedule E.

"Territories" shall mean the countries listed in Schedule D and such other
countries as the parties shall agree in writing from time to time and
"Territory" shall mean any one of them.

"Valid Claim" shall mean a claim in any pending patent application or unexpired
patent which has not been held invalid by a decision of a court or other
appropriate body of competent jurisdiction against which there is no appeal or
where any period for appealing against such decision has expired without an
appeal having been validly submitted.

2  GRANT OF LICENSE

2.01  Rights Granted.
      --------------

     (a)   Subject to the terms and conditions of this Agreement, PPTI hereby
           grants to FEMCARE and FEMCARE hereby accepts from PPTI a license to
           use the Intellectual Property for the purpose of Commercialization of
           the Product solely in the Field in the Territories.

     (b)   Subject to paragraph (c) of this Article, Article 4.02(b) and
           Schedule B the grant of such license to FEMCARE shall be exclusive
           against all parties including PPTI for the term of this Agreement.

     (c)   If during the term of this Agreement FEMCARE shall sell Competitive
           Products in the Territories without the prior written consent of
           PPTI, the grant of this license shall immediately become non-
           exclusive for the remainder of the term of this Agreement.

                                       8
<PAGE>

     (d)   The grant of such license to FEMCARE shall not include the right to
           sublicense to any other person or entity any rights granted
           hereunder, in whole or in part, without the prior written approval of
           PPTI, except as permitted pursuant to paragraph (e) of this Article.

     (e)   FEMCARE shall have the right to grant sublicenses to any Affiliate or
           to any third party of such license or any rights granted to FEMCARE
           under this Agreement upon such terms and conditions as PPTI shall
           approve, such approval not to be unreasonably withheld or delayed.

     (f)   The parties shall execute such formal licenses as are consistent with
           the terms and provisions of this Agreement that FEMCARE considers may
           be necessary or appropriate for registration with any relevant patent
           or other authorities in the Territories.

2.02 Product Improvement Option.
     --------------------------

     (a)   PPTI hereby grants to FEMCARE an exclusive right of first opportunity
           to be granted rights and licenses by PPTI or any of its Subsidiaries
           to obtain Regulatory Approval for and undertake Commercialization of
           any Product Improvements during the term of this Agreement in the
           Field and the provisions of this Article 2.02 shall apply in respect
           of such opportunity.

     (b)   During the term of this Agreement, PPTI shall:

           (i)     promptly notify FEMCARE of each Product Improvement that it
                   proposes to develop, obtain Regulatory Approval for and
                   commence Commercialization of (either by itself or through a
                   Subsidiary or third party), and

           (ii)    present to FEMCARE in writing the terms and conditions upon
                   which PPTI would require FEMCARE to participate in the
                   development of, and obtaining of Regulatory Approvals for
                   such Product Improvement and be willing to license/sublicense
                   such Product Improvement to FEMCARE together with such
                   information as FEMCARE

                                       9
<PAGE>

                   reasonably requires to enable it to evaluate the validity of
                   the proposed development, obtaining such Regulatory Approvals
                   and undertaking such Commercialization itself or through an
                   Affiliate in the Field in the Territories.

     (c)   FEMCARE shall have sixty (60) days in which to accept such terms and
           conditions proposed by PPTI, or, if it so desires, to propose to PPTI
           alternative terms and conditions. PPTI shall have fifteen (15) days
           in which to accept or reject any such alternative.

     (d)   If FEMCARE accepts PPTI's terms and conditions or if PPTI accepts
           such alternative terms and conditions, the parties shall promptly
           execute and deliver to each other a license agreement containing the
           mutually agreed terms and conditions.

     (e)   If the conditions in paragraph (d) of this Article shall not apply,
           FEMCARE shall be deemed to have waived and relinquished any and all
           rights it may have to participate in the development of, obtain
           Regulatory Approval for or to exploit the subject Product Improvement
           and PPTI shall thereafter have the right to develop, obtain
           Regulatory Approvals for and to commence Commercialization (either by
           itself or through a Subsidiary or a third party) of the Product
           Improvement anywhere in the world except in the Field within the
           Territories, unless it has the prior written consent of FEMCARE. If
           the preceding provision shall prove to be invalid for any reason, and
           PPTI shall offer any other person such rights as aforesaid in the
           Field in the Territories on more favorable terms than those offered
           to FEMCARE or proposed by FEMCARE under this Article 2.02, PPTI shall
           make a new offer to FEMCARE of such rights on the same terms as are
           offered to such third party, and FEMCARE shall have ten (10) Business
           Days (any day other than Saturday, Sunday or a legal holiday on which
           the banks in New York City are closed) to accept such new offer,
           failing which FEMCARE shall have no further claim to such Product
           Improvements rights.

                                       10
<PAGE>

2.03 Manufacturing Rights.  PPTI hereby grants to FEMCARE an exclusive option
     --------------------
     to acquire the right and license to the Intellectual Property and the
     Escrow Materials (as defined in the Escrow Agreement), to make or have made
     the Product for use and Commercialization by FEMCARE and its Affiliates,
     distributors and sub-licensees on the terms and conditions of Article 2.01
     in the Field within the Territories. Said option shall be deemed to have
     been exercised if at any time during the term of this Agreement, FEMCARE
     shall have properly given notice to withdraw the Escrow Materials pursuant
     to the Escrow Agreement.

2.04 Reserved Rights. PPTI retains all rights to the Product and the
     ---------------
     Intellectual Property not expressly granted to FEMCARE pursuant to this
     Agreement.

2.05 Sale outside of Territories.  During the terms of this Agreement PPTI
     ---------------------------
     shall not and shall procure that no Subsidiary shall sell or offer for sale
     the Product to any third party outside the Territories knowing or having
     reasonable grounds for believing that such third party intends to sell the
     Product in the Territories.

3    PRODUCT DEVELOPMENT

3.01 PPTI undertakes to FEMCARE to use its reasonable efforts:-

     (a)   to further research and develop the Product so that it complies in
           all respects with the specification referred to in the Supply
           Agreement;

     (b)   develop the methods and processes of manufacturing the Product so
           that PPTI is able to comply in all respects with its obligations to
           FEMCARE under the Supply Agreement;

     (c)   develop the procedures for manufacturing, producing and packaging
           (except to the extent that this is the responsibility of FEMCARE
           pursuant to clause 3.02(C)) the Product under FDA Quality System
           Regulations and/or ISO 9001 Standards, as applicable, in commercial
           quantities; provided that PPTI's obligation in respect of packaging
           shall only

                                       11
<PAGE>

           extend to developing the minimum packaging required for or pursuant
           to such FDA Regulations;

     (d)   develop cost estimates for the commercial scale production of
           Product;

     (e)   complete the Clinical Safety Trials in accordance with the IDE;

     (f)   Upon receipt of FDA and other applicable Regulatory Approvals for the
           export of the Product to the Territories, to thereafter supply to
           FEMCARE, at FEMCARE's expense as provided herein, at the times and in
           the quantities reasonably required by FEMCARE to achieve its
           Performance Benchmarks and otherwise determined by the Advisory Board
           such samples of Product as FEMCARE reasonably deems to be required
           for the Clinical Efficacy Studies and other clinical trials within
           the Territories;

     (g)   supply to FEMCARE promptly all Know-How reasonably requested and
           Regulatory Information required by FEMCARE in sufficient detail and
           quality for use in connection with obtaining Regulatory Approvals or
           for any other proper purpose under this Agreement, including, without
           limitation, carrying out its duties under paragraph (f) of Article
           3.02; and

     (h)   at the request and expense of FEMCARE, conduct or permit FEMCARE to
           conduct any clinical and field trials and studies in addition to the
           Clinical Efficacy Trials required in connection with any Regulatory
           Approvals in the Territories.

3.02 FEMCARE Activities.
     ------------------

     FEMCARE undertakes to PPTI to use its reasonable efforts to:

     (a)   obtain all Regulatory Approvals that are required for
           Commercialization of the Product in the Field in the Territories
           listed in Schedule C;

                                       12
<PAGE>

     (b)   obtain all Regulatory Approvals that are required for
           Commercialization of the Product in the Field in the Territories
           other than those listed in Schedule C when FEMCARE in its absolute
           discretion shall determine that obtaining such Regulatory Approvals
           is warranted to provide timely and orderly market introduction of the
           Product in such Territories;

     (c)   develop packaging and labelling of the packaging of the Product
           (except to the extent this is the responsibility of PPTI pursuant to
           clause 3.01(c) which complies with any Regulatory Approvals for
           Territories or other laws of Territories where Commercialization is
           imminent;

     (d)   conduct the Clinical Efficacy Trials and such outcome analysis
           thereof as may be required in the Territories; and

     (e)   provide to PPTI such information and cooperation as PPTI reasonably
           requires in order to assist PPTI to obtain any required Regulatory
           Approvals for the export of Product to the Territories.

3.03 Expenses Unless otherwise expressly stated each party shall bear the cost
     --------
and expense of carrying out their respective obligations under Articles 3.01 and
3.02 and, without prejudice to such obligations, each party undertakes to the
other to:

     (a)   carry out its obligations expeditiously (subject to Article 3.02(b))
           with all due diligence care and skill with a view to complying with
           such obligations where time is a relevant factor (subject as
           aforesaid) as soon as is reasonably practicable after the date
           hereof;

     (b)   liaise with and provide all reasonable advise assistance and
           information to the other party arising out of such obligations;

     (c)   supply to the other promptly all Regulatory Information in its
           possession;

                                       13
<PAGE>

     (d)   exchange with each other status reports and updates in reasonable
           detail setting out the progress they have made in connection with
           such obligations upon request by either of them, such requests not to
           be made more often than once in each Calendar Quarter;

     (e)   permit the other party at any time during normal business hours upon
           reasonable notice and at reasonable intervals to visit any premises
           in its ownership or control, and to use reasonable efforts to obtain
           permission for other facilities at which testing or trials are being
           carried out by the other directly or indirectly in connection with
           such obligations;

     (f)   procure that in complying with such obligations it complies strictly
           with all applicable laws and regulations including without limitation
           those that apply to the conduct of any activities at any site at
           which such activities are being carried on.

3.04 (a)   After this Agreement has been executed and delivered, the parties
           agree to form an Advisory Board made up of not more than four (4)
           individuals, two (2) each from PPTI and FEMCARE, which shall include
           PPTI's President from time to time and FEMCARE's managing director
           from time to time, which Advisory Board shall be retained throughout
           the term of this Agreement.

     (b)   Subject to paragraph (c) of this Article the Advisory Board shall
           meet from time to time (but at least once a Calendar Quarter and more
           frequently if mutually agreed to by PPTI and FEMCARE) to discuss such
           matters as it considers appropriate arising out of this Agreement and
           the Supply Agreement.

     (c)   After the commencement of Commercialization in Australia and at least
           one other Territory, the Advisory Board shall meet semiannually.

     (d)   The location, time and length of meetings of and all procedural
           matters (including quorums and voting) relating to the Advisory Board
           shall be agreed to by the parties.

                                       14
<PAGE>

     (e)   The Advisory Board shall alternate the location of its meetings
           between the facilities of each of the parties or by mutual agreement
           meet at any location or telephonically.

     (f)   Without prejudice to the respective rights and obligations of the
           parties under this Agreement the Advisory Board shall have executive
           authority to deal with such matters as shall be mutually agreed upon
           in writing by all members of the Advisory Board.

3.05 Supply Agreement
     ----------------

     (a)   Each of PPTI and FEMCARE shall cause to be deposited into escrow with
           Piper, Marbury, Rudnick & Wolfe, Chicago, Illinois, a copy of the
           Supply Agreement executed by a duly authorized officer or director of
           such party.

     (b)   The copies of the Supply Agreement shall be dated and delivered to
           FEMCARE (as to the PPTI executed Supply Agreement) and PPTI (as to
           the FEMCARE executed Supply Agreement) as provided in the written
           instructions and notice to said law firm setting forth the date on
           which Commercialization is to commence or has commenced (i) from
           FEMCARE that it intends to commence the Commercialization of Product
           under this Agreement or (ii) from PPTI that FEMCARE has commenced the
           Commercialization of Product under this Agreement.

     (c)   If written instructions and notice to said law firm have not been
           delivered thereto on or before ***, without any further instruction
           or action, said law firm shall return to PPTI the copy of the Supply
           Agreement deposited by it and return to FEMCARE the copy of the
           Supply Agreement deposited by it.

     (d)   FEMCARE and PPTI jointly and severally agree to indemnify, defend and
           hold Piper Marbury Rudnick & Wolfe harmless from any and all losses,
           costs, damages and expenses said law firm may suffer or incur as a
           result of its serving as escrow agent for the Supply Agreement.

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       15
<PAGE>

     (e)   Piper Marbury Rudnick & Wolfe may, upon 10 days notice to PPTI and
           FEMCARE withdraw as escrow agent for the Supply Agreement. The
           parties shall promptly meet to designate a replacement escrow agent
           and so notify Piper Marbury Rudnick & Wolfe, who on the written
           instructions of the parties shall deliver the Supply Agreements in
           its possession to the replacement escrow agent. Failing the
           appointment of a replacement escrow agent for the Supply Agreement,
           Piper Marbury Rudnick & Wolfe shall return the Supply Agreement
           signed by PPTI to PPTI and the return the Supply Agreement signed by
           FEMCARE to FEMCARE.

4    PAYMENTS TO PPTI

4.01 License Fees. FEMCARE, relying on the representations and warranties by
     ------------
PPTI in Article 20.2 shall pay to PPTI a non-refundable license fee of
US$1,000,000, which shall be payable in two equal US$500,000 installments, the
first being due and payable by wire transfer upon execution and delivery of this
Agreement and the second being due and payable by wire transfer on May 1, 2000.

4.02 Royalties.
     ---------

     (a)   Subject to the provisions of this Agreement, FEMCARE shall pay PPTI,
           within thirty (30) days after the close of each Calendar Quarter
           throughout the term of this Agreement commencing after the first day
           of the first Marketing Year a royalty equal to *** of Net Sales of
           Product for the Calendar Quarter (or part thereof in the case of the
           first or last Calendar Quarter for which a royalty is payable if not
           a full quarter) then ended, such royalty to be calculated initially
           in Pounds Sterling (on the basis of Net Sales) and converted to and
           paid in United States Dollars at the average buy/sell exchange rate
           announced by Chase Manhattan Bank, N.A., New York, New York, or its
           successor, for the last Business Day of the Calendar Quarter for
           which such royalties are payable.

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       16
<PAGE>

     (b)   If the total royalty payable to PPTI by FEMCARE for the first
           Marketing Year and each subsequent Marketing Year is less than the
           applicable "Minimum Royalty" for that Marketing Year, FEMCARE shall
           within 90 days of the end of each such Marketing Year pay to PPTI
           (subject to paragraph (e) of this Article 4.02) a sum equal to the
           applicable Minimum Royalty less the actual royalty payable. At any
           time after the fifth Marketing Year, FEMCARE may notify PPTI that it
           is not going to make such payment in respect of any Marketing Year
           commencing after such fifth Marketing Year in which case the license
           granted pursuant to clause 2.01 shall at the expiry of such 90 day
           period become non-exclusive to FEMCARE for the remainder of the term
           of this Agreement.

           The applicable Minimum Royalty shall be as follows:

           Marketing Year                Minimum Royalty

               First                     ***

               Second                    ***

               Third                     ***

               Fourth                    ***

               Fifth and thereafter      ***

     Provided that if the rate of royalty payable under Article 4.02 is reduced
     pursuant to any provision of this Agreement or FEMCARE is permitted by this
     Agreement to set off or deduct any monies against any royalty payable to
     clause 4.02, the Applicable Minimum Royalty shall be calculated as if such
     rate of royalty had not been so reduced and such set off or deduction had
     not been made.

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       17
<PAGE>

     Provided further that in any relevant Marketing Year such applicable
     Minimum Royalty shall be reduced by the extent to which FEMCARE failed to
     sell or procure that sale of sufficient Products to avoid having to pay
     such Minimum Royalty directly as a result of any material breach of this
     Agreement or the Supply Agreement by PPTI (and for this purpose force
     majeure under either Agreement which prevents PPTI from being in breach
     thereof shall be disregarded, and in the case of a force majeure affecting
     FEMCARE or its performance on  which such Minimum Royalty for such
     Marketing Year depends is affected by the force majeure, the Minimum
     Royalty shall be reduced by such fair amount.

     Provided, however, that no Minimum Royalty shall be payable in respect of
     any period during which Product cannot be Commercialized as a result of any
     inherent defect in the Product, any Recall required by any applicable
     regulatory body that is not specific to identified Product lots that are
     replaced within a reasonable period of time, or the Product being found to
     not be safe for use in humans.

     (c)   If the applicable royalty rate exceeds the permissible rate
           established in a Territory for royalty payments in that Territory or
           royalty remission from that Territory, as the case may be, the rate
           of royalty shall not exceed the established permissible rate and
           FEMCARE shall pay the difference between the royalty due and the
           royalty at the established permissible rate unless said payments made
           outside the Territory are illegal. In such event, the parties shall
           negotiate in good faith such equitable adjustments to other payments
           and financial obligations as may be appropriate so that the parties
           realize the intended benefits of this Agreement.

     (d)   Any Affiliate of FEMCARE may pay any royalty obligations of FEMCARE
           under this Agreement directly to PPTI with the same effect as if the
           payment had been made by FEMCARE.

     (e)   All payments under this Agreement shall be made without deduction of
           any taxes, charges, or duties except for such taxes, charges or
           duties which are required under any applicable laws to be deducted.
           Any tax deducted by FEMCARE or

                                       18
<PAGE>

           any Affiliate of FEMCARE under the laws of any foreign country for
           the account of PPTI shall be promptly paid to the proper governmental
           authority, and FEMCARE or its Affiliates shall furnish PPTI with
           proof of payment of such tax together with official or other
           appropriate evidence issued by the appropriate governmental authority
           sufficient to enable PPTI to document claim for income tax credit in
           respect to any sum so deducted. Any such tax required to be withheld
           shall be an expense of and borne solely by PPTI.

     (f)   FEMCARE shall keep accurate books and records of all payments due to
           PPTI. Said books of account shall be kept at FEMCARE's principal
           place of business or the principal place of business of an
           appropriate Affiliate to which this Agreement relates.

     (g)   PPTI shall have the right to nominate an independent accountant
           acceptable to and approved by FEMCARE (which approval shall not be
           unreasonably withheld) who shall have access to FEMCARE's records on
           reasonable notice during reasonable business hours for the purpose of
           verifying, at PPTI's expense (except as provided below), the royalty
           payable as provided for in this Agreement for the three preceding
           years, but this right may not be exercised more than once in any
           year. PPTI shall solicit or receive only information relating to the
           accuracy of the royalty report and the royalty payments made. Any
           underpayment of royalty shall be paid within thirty (30) days of the
           delivery of a detailed written accountants report to FEMCARE. Any
           overpayment of royalty shall be credited to the next royalty payment
           due from FEMCARE. If no further royalty payments will be due then a
           refund will be made within sixty (60) days of the audit. If the
           accountant's report shows an underpayment of royalties of five
           percent (5%) or more, FEMCARE shall reimburse PPTI for all cost and
           expense of the accountant's report.

     (h)   FEMCARE shall deliver to PPTI written reports of Net Sales during the
           preceding Calendar Quarter on or before the thirtieth (30th) day
           following the end of each Calendar Quarter. Such reports shall
           include a calculation of the earned royalty due and shall be
           accompanied by the monies due. If no earned royalties are due, then
           FEMCARE shall indicate such on its written report.

                                       19
<PAGE>

4.03 Samples.
     -------

     (a)   FEMCARE shall purchase from PPTI and PPTI shall sell to FEMCARE such
           quantities of Product in units of *** purchased in a primary
           container, individually wrapped and labelled so as to comply with any
           applicable Regulatory Approvals or laws as FEMCARE may reasonably
           require to conduct the Clinical Efficacy Trials.

     (b)   Initial sample delivery shall be determined by the Advisory Board.

     (c)   FEMCARE shall pay to PPTI upon delivery of each such sample (FOB at
           PPTI in San Diego, California) an amount equal to PPTI's cost of
           manufacture, not to exceed *** unit of Product plus the cost of
           packaging and delivery of (by the method required by FEMCARE) the
           Product from San Diego, California to Nottingham, England or other
           site(s) designated by FEMCARE.

5    DUTIES OF FEMCARE AND TRADE MARKS

5.01 FEMCARE shall during the term of this Agreement:

     (a)   Subject to paragraphs (a) and (b) of Article 3.02 use its reasonable
           efforts:

           (i)     to Commercialize the Product in the Territories throughout
                   the term of this Agreement;

           (ii)    to begin selling the Product in a Territory promptly after
                   obtaining Regulatory Approval therefor;

           (iii)   to maintain adequate sales representation in each Territory
                   once sales of the Product have commenced there;

           (iv)    maintaining adequate facilities for the storage and
                   distribution of such quantities of the Product as may from
                   time to time be reasonably necessary to adequately serve the
                   applicable Territories; and

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       20
<PAGE>

           (v)     subject to the express provisions of this Agreement to
                   provide the standard and type of services consistent with the
                   services currently provided by FEMCARE in connection with the
                   sale and distribution of its own products or any products
                   sold by FEMCARE, Ltd. provided that FEMCARE may satisfy any
                   of the foregoing obligations either itself or through
                   Affiliates, distributors or sub-licencees;

     (b)   not to permit its Affiliates, distributors or sub-licensees to make
           any verbal or written warranties, representations, or claims
           concerning the Product except as approved in advance by PPTI in
           writing;

     (c)   to address and resolve promptly all customer complaints related to
           Products supplied by FEMCARE, its Affiliates or distributors or sub-
           licencees in a manner consistent with FEMCARE'S and FEMCARE, Ltd.'s
           approach to the resolution of complaints lodged against other
           products marketed by them, (subject to PPTI providing FEMCARE with
           any information in its possession that may facilitate prompt and
           favorable resolution of any such complaints);

     (d)   to maintain complete records regarding such complaints and the
           resolution thereof and make these available to inspection by PPTI on
           reasonable notice during business hours;

     (e)   to maintain such reports of the Product sold by FEMCARE as are
           required by all applicable laws and retain such records for at least
           five (5) years following the expiration or other termination of this
           Agreement;

     (f)   not to sell, nor authorise its Affiliates, distributors or sub-
           licensees to sell any Product past the shelf date or expiration date
           for such Product printed on the packaging thereon.

                                       21
<PAGE>

5.02 (a)   FEMCARE shall have the exclusive right to select all trademarks and
           trade names to be associated with the Product in the Territories
           subject to the approval of PPTI, which approval will not be
           unreasonably withheld or delayed.

     (b)   All costs associated with the registration and maintenance of such
           trademarks and trade names in the Territories will be borne by
           FEMCARE.

     (c)   FEMCARE shall grant to PPTI a royalty free, perpetual license (with
           the right to sublicense) to use the trademarks and trade names in
           connection with the marketing and sale of Product outside the
           Territories in the Field on such other terms as FEMCARE shall
           reasonably require so as to prevent FEMCARE'S rights in such trade
           marks or trade names being damaged by PPTI's use thereof under such
           license.

     (d)   The parties will not do or cause or permit to be done any act or
           thing impairing the validity or enforceability of such trademarks or
           trade names.

5.03 While the Product is manufactured by or for PPTI all labeling for the
     Product shall disclose that the Product is manufactured by PPTI. Such
     statements shall prominently appear on all packaging, labels, advertising
     and promotional materials for the Product.

6    CONFIDENTIALITY

6.01 Subject to Article 6.03 during the term of this Agreement and for a period
     of five (5) years thereafter, each party shall maintain in confidence and
     shall not disclose to any third party any Know-How or other information
     received from the other party relating to the Product, and shall not use
     the other party's Know-How or other information except for the purposes of
     this Agreement without the prior written consent of such other party (such
     Know-How and other information being called in this Article "Confidential
     Information"). These confidentiality and non-use obligations shall not
     apply to any Confidential Information that the receiving party can
     demonstrate:

                                       22
<PAGE>

     (a)   at the time of disclosure to the receiving party was, or thereafter
           becomes, a part of the public domain through no fault of the
           receiving party, its Affiliates distributors or sub-licensees;

     (b)   was subsequently lawfully disclosed to the receiving party by a third
           party not under an obligation of confidentiality with or through the
           disclosing party;

     (c)   was in the lawful possession of the receiving party prior to
           disclosure by the disclosing party; or

     (d)   is required to be disclosed by judicial or administrative order
           provided that notice is given to the disclosing party and the
           disclosing party has an opportunity to seek a protective order, and
           further provided, that disclosure is limited to compliance with the
           judicial or administrative order.

6.02 During the term of this Agreement, each party shall take all reasonable
     steps to:

     (a)   prevent any disclosure in breach of Article 6.01 of Confidential
           Information of the other which would be materially prejudicial to the
           interests of the other party;

     (b)   limit the disclosure of information to such of its Affiliates,
           distributors and sub-licensees and their respective employees as
           require the information for the purposes of this Agreement; and

     (c)   procure that the persons referred to in paragraph (b) of this Article
           6.02 enter into appropriate confidentiality agreements.

6.03 Notwithstanding the foregoing provisions of this Article, the parties and
     their Affiliates, distributors and sub-licensees shall be entitled (subject
     to obtaining the prior written approval of PPTI such approval not to be
     unreasonably withheld or denied) to disclose Confidential Information of
     the other party which would otherwise be protected by the

                                       23
<PAGE>

     provisions of Article 6.01 to actual or potential customers for Product in
     so far as such disclosure is reasonably necessary to Commercialize
     Products.

6.04 FEMCARE shall not, without the prior written consent of PPTI, during the
     term of this Agreement or for a period of two (2) years after its
     termination or expiration, unless PPTI has ceased operation in the Field,
     employ or contract with any person employed by PPTI or its Affiliates
     during the term of this Agreement who has worked on any of the subject
     matter of the Know-How.

6.05 PPTI shall not, during the term of this agreement or for a period two (2)
     years after its termination or explanation (unless FEMCARE has ceased
     operation) employ or contract with in the Field any Affiliate, distributor
     or sub-licensee of FEMCARE in the Field during the term of this Agreement
     or any employee of FEMCARE, its Affiliates, distributors or sub-licensees
     in the Field during the term of this Agreement without the prior written
     consent of FEMCARE.

6.06 Immediately upon the expiration or other termination of this Agreement,
     FEMCARE shall return to PPTI all of the information regarding the Know-How
     and all copies thereof (including summaries and notes thereof), in its
     possession or control, except that one copy of such information may be
     retained by FEMCARE's counsel under seal to evidence compliance with this
     Agreement.

7    INDEMNIFICATION

7.01 By FEMCARE. FEMCARE shall indemnify, defend and hold PPTI, its Affiliates,
     ----------
     and the officers, directors and employees of PPTI and its Affiliates
     harmless from and against any and all liabilities, damages, loss, cost or
     expense (including reasonable attorneys' fees) resulting from third party
     claims or suits brought against PPTI or its Affiliates which arise out of
     FEMCARE's breach of any of its duties or obligations under this Agreement
     or from any willful misconduct or negligent acts or omissions of FEMCARE,

                                       24
<PAGE>

     its Affiliates, distributors or employees in the manufacture, labeling,
     storage, transport, distribution or Commercialization of the Product.

7.02 By PPTI. PPTI shall indemnify, defend and hold FEMCARE, its Affiliates,
     -------
     distributors and sub-licensees harmless against all liabilities, damages,
     loss, cost or expense (including reasonable attorneys' fees) resulting from
     third party claims and suits brought against them which arise out of PPTI's
     breach of any of its duties or obligations under this Agreement or from any
     or any of them willful misconduct or negligent acts or omissions of PPTI or
     its Subsidiaries, licensees or employees in the manufacture, labelling,
     storage, transport, distribution or Commercialization of the Product.

7.03 Notice and Defense. Each party seeking indemnity ("Claimant") pursuant to
     ------------------
     this Article shall promptly notify in writing the other ("Indemnitor") of
     any claims or suits for which it seeks indemnification from the other
     party. The Indemnitor shall promptly assume responsibility for the defense
     of the claim or suit, including settlement negotiations and any legal
     proceedings which Indemnitor shall handle at its sole discretion, and
     Claimant shall fully cooperate in Indemnitor's handling and defense
     thereof. In no event shall a Claimant make any payment on any claim or suit
     for which indemnity may be sought without the prior written consent of the
     Indemnitor.

7.04 Damages. Notwithstanding any provision in this Agreement which may be to
     -------
     the contrary in no event will either party be liable to the other for
     special, exemplary, or punitive damages.

8    RECALL

     If the Supply Agreement is not in effect and FEMCARE is manufacturing or
     having manufactured the Product pursuant to any license granted hereunder,
     FEMCARE, in its sole discretion, by order of a government or government
     agency, or at the direction of

                                       25
<PAGE>

     PPTI, determine to recall any Product, FEMCARE shall notify PPTI promptly
     by telephone or electronic mail or telecopy. FEMCARE shall give PPTI
     reasonable opportunity to comment in advance on any public announcement to
     be made by FEMCARE regarding any recall. In the event any Product is
     recalled, FEMCARE shall assume complete responsibility for conducting such
     recall; however, PPTI shall provide FEMCARE with any information that may
     be in PPTI's possession or control concerning the manufacture of the
     Product which FEMCARE reasonably may require to conduct such recall.
     FEMCARE and PPTI shall cooperate to identify and correct deficiencies, if
     any, in the manufacture, shipment, storage or distribution of the Product.
     FEMCARE shall pay all costs of conducting such recall.

9    INVENTIONS

9.01 PPTI Inventions.
     ---------------

     (a)   Title to any inventions or discoveries made by PPTI employees or
           agents without inventive contribution of FEMCARE employees or agents,
           based on any PPTI Know-How related in any way to the Product or
           developed during PPTI'S performance under Article 3.01 ("PPTI
           Inventions") shall belong to PPTI.

     (b)   PPTI may file applications for U.S. and/or foreign patents at its own
           expense for such PPTI Inventions and shall keep FEMCARE fully and
           promptly informed as to such PPTI Inventions and the filing,
           prosecution and maintenance of such patent applications) and
           patent(s) and corresponding foreign patent applications.

     (c)   If PPTI does not elect to file, prosecute or maintain any such patent
           applications or patent(s) on such PPTI Inventions after being reduced
           to practice, PPTI shall so notify FEMCARE and FEMCARE shall, in its
           sole discretion, have the right to require that PPTI file, prosecute
           or maintain on a country-by-country basis such patent applications or
           patent(s) on such PPTI Invention in which case FEMCARE shall pay the
           costs and expenses of and manage the prosecution of such patent
           application(s) or patent(s) and

                                       26
<PAGE>

           PPTI will co-operate fully and promptly with FEMCARE in respect of
           such management and prosecution.

     (d)   Until FEMCARE shall have recovered all costs and expenses associated
           with filings, prosecuting, issuing and maintaining said patent
           applications or patent(s) FEMCARE'S obligation to pay royalties to
           PPTI pursuant to Article 4.02 shall be reduced from *** to not less
           than *** for Net Sales in each Territory in which the patent
           application is being prosecuted.

9.02 FEMCARE Inventions. Title to any inventions and discoveries made by
     ------------------
     FEMCARE employees or agents without inventive contribution by PPTI
     employees or agents and conceived or first reduced to practice under this
     Agreement (hereinafter, "FEMCARE Inventions") shall belong to FEMCARE.
     FEMCARE may file patent application(s) for FEMCARE Inventions in its own
     discretion and at its own expense.

9.03 Joint Inventions.
     ----------------

     (a)   Title to any inventions or discoveries made jointly by employees or
           agents of PPTI and FEMCARE and conceived or first reduced to practice
           under this Agreement ("Joint Inventions") shall belong to PPTI and
           FEMCARE jointly, i.e., each shall own an undivided one-half interest
           therein.

     (b)   PPTI and FEMCARE shall keep each other fully and promptly informed as
           to such Joint Inventions.

     (c)   After Joint Inventions are reduced to practice FEMCARE shall have
           primary responsibility for filing, prosecuting and maintaining any
           U.S. patent application(s) or patent(s) and foreign counterpart
           thereof for Joint Inventions, but shall give full consideration to
           PPTI's recommendations including selection of attorney(s).

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       27
<PAGE>

     (d)   The expenses for Joint Inventions shall be borne equally by FEMCARE
           and PPTI, but either may, by giving at least one month's notice to
           the other, withdraw from further participation in the filing,
           prosecution and/or maintenance of any such patent application(s) or
           patent(s)and shall not be liable for any expenses incurred after
           written notice is given.

     (e)   If either party does not elect to file, prosecute or maintain any
           such patent application (s) or patent(s) in a country or countries or
           after electing to participate in the filing, prosecution and/or
           maintenance on such Joint Inventions in a country or countries, does
           not pay its share of the expenses within one hundred twenty (120)
           days of written notification of expenses being due, the other party,
           in its sole discretion, shall have the right to file, prosecute or
           maintain at its expense on a country-by-country basis each such
           patent application(s) and patent(s).

     (f)   If FEMCARE pays all of the costs and expenses of filing, prosecuting
           and maintaining any Joint Invention, until FEMCARE recovers one-half
           of such costs and expenses, its royalty rate to PPTI in the Territory
           in which the patent issues shall be reduced from *** to not less than
           ***.

     (g)   If PPTI pays all of the costs and expenses of filing, prosecuting and
           maintaining any Joint Invention, until PPTI recovers one-half of such
           reasonable costs and expenses, the royalty rate charged to FEMCARE,
           its Affiliates and distributors in the Territory in which the Patent
           issues shall increase from *** to not more than ***.

9.04 Each party shall require its employees or agents responsible for conducting
     research in performance of this Agreement to keep contemporaneous records
     of their results and findings in sufficient detail to document any
     inventions of discoveries made by such employees and agents under this
     Agreement in bound notebooks (that shall be reviewed and signed by a
     witness on a regular basis).

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       28
<PAGE>

9.05  PPTI and FEMCARE will cooperate in a timely manner to prepare, review and
      execute patent applications and all such further papers, as may be
      necessary to enable the parties or the party pursuing any patent
      application to protect Joint Inventions by patent in any and all countries
      and to vest title to said patent application(s) and patent(s) and assist
      in Patent Office proceedings.

9.06  If either party wishes to practice a Joint Invention patented in its sole
      name or in the joint names of the parties outside the grant provided to
      FEMCARE under Article 2.01, the party practicing the patented Joint
      Invention will pay to the other party a royalty of not less than *** nor
      more than *** of the Net Selling Price of any Joint Product. In no event
      shall such royalty be payable with respect to the use of a Joint Invention
      by one party to provide goods or services to the other party. Provided
      however, that if a party seeks to practice such Joint Invention for which
      it did not pay its share of the cost and expenses, such party shall have
      to reimburse the party that paid the costs and expenses one-half of the
      costs and expenses incurred in the country or countries in which the party
      is seeking to practice the Joint Invention.

9.07  Clause 4.02 (except for paragraph (b)) shall apply in respect of any such
      royalty payable making such changes as are necessary to reflect the proper
      payor and payee of the royalty hereunder, and when the royalty is payable
      by PPTI to pay it in Pounds Sterling.

10    TERM AND TERMINATION

10.01 The term of this Agreement shall commence as of the date it is executed
      and delivered by both parties, and, unless terminated earlier in
      accordance with its terms, shall continue for an initial period of the
      greater of twenty (20) years from the Effective Date or the date upon
      which the last of the Patents in the Territories expires.

------------------------
***  Material is confidential and has been omitted and filed separately with
     the Securities and Exchange Commission.

                                       29
<PAGE>

10.02 This Agreement may be terminated as follows:

      (a)  (i)     By one party in the event the other substantially fails to
                   perform or otherwise breaches any of its material
                   obligations, other than obligations to pay money or achieve a
                   Performance Benchmark under this Agreement by giving notice
                   of its intent to terminate and stating the grounds therefor.

           (ii)    The party receiving the notice shall, subject to the
                   provisions of Article 15 and sub-paragraph (v) of this
                   paragraph (a) have sixty (60) days from the date of receipt
                   thereof to cure the failure or breach.

           (iii)   In the event such breach is cured, the notice shall be of no
                   effect.

           (iv)    In the event it is not cured, this Agreement shall, without
                   further action, terminate at the end of such sixty (60) day
                   period.

           (v)     Notwithstanding the foregoing provisions of this Article 10
                   if the failure to perform or other breach is due to
                   circumstances referred to in Article 17 and such party has
                   complied with the provisions of such Article 17 and is making
                   all reasonable efforts to perform or cure such failure or
                   breach, Article 10.02 (a) shall not apply unless or until the
                   failure to perform or other breach shall have lasted
                   continuously for one hundred and twenty (120) days from the
                   initial receipt of notice of breach.

      (b)  (i)     By one party in the event the other fails to make any payment
                   of money due under this Agreement or the Supply Agreement by
                   giving notice of its intent to terminate and stating the
                   amount of money due, reason said amount is due, and the
                   intended termination date.

           (ii)    The party receiving the notice shall, subject to the
                   provisions of Article 15 have thirty (30) days from the date
                   of receipt thereof to cure the failure to pay (during which

                                       30
<PAGE>

                   time if PPTI is the party issuing the notice it shall not be
                   obligated to supply Product to FEMCARE under the Supply
                   Agreement unless payment of such Product is protected by a
                   suitable letter of credit).

           (iii)   In the event such payment breach is cured, the notice shall
                   be of no effect.

           (iv)    In the event it is not, this Agreement shall, without further
                   action terminate at the end of such thirty (30) day period.

      (c)  (i)     Subject to Schedule B, by one party in the event the other
                   party substantially fails to meet its Performance Benchmarks
                   through no fault of the first party by giving notice of its
                   intent to terminate and stating the grounds therefor.

           (ii)    The party receiving the notice shall subject to the
                   provisions of Article 15 have one hundred eighty (180) days
                   from the date of receipt thereof to cure the default by
                   achieving the Performance Benchmark.

           (iii)   In the event such default is cured, the notice shall be of no
                   effect.

      (d)  FEMCARE is dissolved or liquidates, makes a general assignment for
           the benefit of its creditors, files a voluntary petition under any
           applicable bankruptcy or insolvency law, has a receiver appointed for
           its property, or has a petition for bankruptcy or insolvency filed
           against it which petition is not dismissed within one hundred eighty
           (180) days after filing.

10.03 If the party in default under Article 10.02 is FEMCARE, and the default is
      not cured within the applicable period, this Agreement shall, unless PPTI
      notifies FEMCARE in writing prior to the end of such period, without
      further action, terminate at the end of such period and PPTI shall be
      entitled to use any and all data and information of FEMCARE to continue
      obtaining Regulatory Approvals in its own name and right.

                                       31
<PAGE>

10.04 If FEMCARE shall have properly exercised its rights to withdraw the Escrow
      Materials from the Escrow pursuant to the Escrow Agreement (and
      correspondingly exercised its option under Article 2.02 above, FEMCARE may
      continue to prosecute any Regulatory Approvals in the Territories and
      shall be entitled to deduct from any sums payable to PPTI whatsoever any
      moneys due to it from PPTI whether in respect of any breach of this
      Agreement by PPTI or otherwise; provided that if FEMCARE does not exercise
      as aforesaid and serve notice of termination upon PPTI, this Agreement
      shall terminate and the deposits in the Escrow under the Escrow Agreement
      shall be returned to PPTI.

10.05 Effects of Termination or Expiration. Subject to Articles 10.04 and 11
      ------------------------------------
      upon the expiration or termination of this Agreement under 10.01 and 10.02
      above, the obligations of PPTI and the rights of FEMCARE hereunder shall
      immediately terminate.

      Provided that following such expiration or termination FEMCARE, its
      Affiliates, distributors and sub-licensees shall continue to have the
      right to sell, for a reasonable period not to exceed ninety (90) days
      following the date of termination or expiration, any Product then held in
      its inventory at not less than 75% of its then usual and customary sales
      prices.

      Provided further that notwithstanding such termination or expiration,
      FEMCARE shall pay to PPTI any royalties due to it through and including
      the sale of such inventory Product.

10.06 Escrow Agreement.   To secure its obligations to manufacture and supply
      ----------------
      Product or enable FEMCARE to manufacture or have manufactured Product in
      certain circumstances, PPTI has agreed to enter into an Escrow Agreement
      of even date herewith.

11    RIGHTS UPON TERMINATION

11.01 Subject to Article 10, the termination or expiration of this Agreement
      shall not relieve and release either party from its obligations to make
      any other payment which may be owing to

                                       32
<PAGE>

      the other party under the terms of this Agreement or from any other
      liability which either may have to the other arising out of this Agreement
      or the breach of this Agreement.

11.02 All provisions of this Agreement which in order to give effect to their
      meaning need to survive its termination or expiration shall remain in full
      force and effect thereafter.

12    ADVERSE EFFECTS

12.01 (a)  The parties recognize that the holder of or applicant for Regulatory
           Approvals for a country may be required to submit information and
           file reports to various governmental agencies on Products under
           clinical investigation, Products proposed for Commercialization, or
           Commercialized Products.

      (b)  Consequently, each party agrees to provide to the other within three
           (3) Business Days (any day other than a Saturday, Sunday or legal
           holiday in the U.S. on which banks in New York shall be closed) of
           the initial receipt a copy of a report of any adverse experience with
           Product that is serious or unexpected.

      (c)  Serious adverse experience means any experience that suggests a
           significant hazard, contraindication, side effect or precaution, or
           any experience that is fatal or life threatening, is permanently
           disabling, requires or prolongs inpatient hospitalization, or is a
           congenital anomaly, cancer, or overdose.

      (d)  An unexpected adverse experience is one not identified in nature,
           specificity, severity or frequency in the current investigator
           brochure or labeling for the Product.

12.02 In the case where either party has licensed the sale of Product to a third
      party, each party agrees to obligate any such licensee or distributor
      thereof to promptly report to the licensing party any serious adverse
      experience or unexpected adverse experience relating to such Product so
      that each party can report such experience to the other party pursuant to
      the provisions hereunder.

13    PATENTS

                                       33
<PAGE>

13.01 (a)  Subject to Article 13.02(a) PPTI agrees faithfully, at its sole
           expense to diligently prosecute to (and thereafter maintain) all
           patents applications for Patents referred to in paragraph (a) of the
           definition of "Patents" in the United States and, when reasonable
           under the circumstances or required by a Patent Office because more
           than one invention is claimed in an application, to file and
           prosecute additional patent applications, re-examinations, reissues
           or the like covering patentable technology disclosed in the Patents
           in the United States and within any applicable time limits to file
           foreign corresponding applications in the Territories (unless
           otherwise agreed in writing by FEMCARE) and to prosecute the same to
           grant and thereafter maintain the same.

      (b)  PPTI shall have the duty and responsibility to pay when due for
           payment all taxes, maintenance fees and annuities on the Patents and
           to maintain in force all patents within the Patents granted in the
           Territories for the full terms thereof.

      (c)  PPTI shall within thirty (30) days of mailing or receipt, provide
           FEMCARE with copies of all future filed patent applications relating
           to the Patents and, upon request, all correspondence from and to
           patent offices worldwide relating to both the Patents and future
           filed patent applications, re-examinations, reissues or the like.

13.02 (a) If PPTI, in its discretion, decides not to comply with any of the
          actions required to be taken by it under Article 13.01(a) and notifies
          FEMCARE in writing accordingly (such notice to specify clearly the
          countries in respect of which it is not going to take such actions) at
          least three months before the expiration of any material time period
          in respect of such actions, PPTI will be released from its obligations
          thereunder in respect of the actions so notified. PPTI shall so notify
          FEMCARE and FEMCARE shall, in its sole discretion, have the right to
          elect to assume the prosecution of such patent application on behalf
          of PPTI in respect of any such actions (including for the avoidance of
          doubt filing any applicable patent applications and prosecuting to
          grant any applicable patents and thereafter maintaining such patents)
          and PPTI shall co-operate fully and promptly with FEMCARE in the
          taking of any such actions by it.

                                       34
<PAGE>

      (b)  If FEMCARE so elects, it shall pay the costs and expenses of taking
           such actions and, notwithstanding anything in Section 4.02 to the
           contrary, FEMCARE's obligation to pay a royalty to PPTI in such
           country which is a Territory under Article 4 shall be reduced from
           *** to no less than *** until FEMCARE shall have recovered all costs
           and expenses associated with filings, prosecuting, issuing and
           maintaining said patent applications or patent(s).

      (c)  If the country to which paragraph (b) of this Article 13.02 is the
           United States FEMCARE shall be entitled to deduct all costs and
           expenses as aforesaid from any sums payable to PPTI under this
           Agreement until they have been reimbursed in full.

      (d)  PPTI shall not be deemed to be in breach of this Agreement for
           failing to comply with Article 13.01(a) to the extent that it fails
           to take any actions properly notified to FEMCARE pursuant to Article
           13.02(a).

13.03 (a)  The parties agree to cooperate in order to avoid loss of any rights
           which may otherwise be available to the parties under the U.S. Drug
           Price Competition and Patent Term Restoration Act of 1984, the
           Supplementary Certificate of Protection of the Member States of the
           European Common Market and other similar measures in any other
           country in the Territories.

      (b)  Without limiting the foregoing, PPTI agrees to notify FEMCARE
           promptly upon receipt of any PMA approval to Commercialize Product in
           the United States and PPTI agrees to file an application for patent
           extension in the U.S. Patent and Trademark Office within the sixty
           (60) day period following the receipt of such PMA approval.

14    INFRINGEMENT

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       35
<PAGE>

14.01 (a)  If, as a result of the manufacture or Commercialization of the
           Product in the Territories pursuant to this Agreement and the Supply
           Agreement, PPTI and its Subsidiaries or FEMCARE and/or its
           Affiliates, distributors or sub-licensees, are sued for patent
           infringement or infringement of other intellectual property rights or
           threatened with such a lawsuit or other action by a third party, PPTI
           and FEMCARE shall promptly meet to analyze the infringement claim and
           avoidance of same.

      (b)  If following such meeting the parties fail to agree on a joint
           program of action, including how the costs of any such action are to
           be borne and how any damages or other sums received from such action
           are to be distributed, then FEMCARE shall be entitled to take action
           against the third party at its sole expense and it shall be entitled
           to all damages or other sums received from such action. PPTI shall
           agree to be joined in any suit to enforce such rights subject to
           being indemnified and secured in a reasonable manner as to any costs,
           damages, expenses or other liability and shall have the right to be
           separately represented by its own counsel at its own expenses.

      (c)  If it is necessary to obtain a license from such third party, PPTI
           and FEMCARE in negotiating such a license shall in the extent
           practicable use their reasonable efforts to minimize the license fees
           and/or royalty payable to such third party.

      (d)  If FEMCARE or its Affiliates, distributors or sub-licensees shall be
           obligated to pay a license fee and/or royalty to a third party under
           such licence as the result of the Commercialization of the Product or
           the use of Patents or Know-How then PPTI shall elect within ten (10)
           days of the execution of the license with such third party to:

           (i)     pay all fees and expenses associated with obtaining and
                   maintaining the license; or

           (ii)    to have the royalties specified in Article 4.02 reduced by
                   ***.

      (e)  FEMCARE shall be entitled to deduct from up to one-half of the
           royalties payable under clause 4.02 any sums paid to third parties
           (including without limitation damages, payments in settlement of
           litigation and reasonable cost and expenses incurred in relation to
           any alleged or actual infringement of third party rights in the
           manufacture or

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       36
<PAGE>

           Commercialization of any product; provided that such payments are
           specifically approved, in advance, by PPTI, such approval to not be
           unreasonably withheld or delayed).

14.02 (a)  In the event that there is infringement of a Patent involving the
           Product by a third party in the Territories, PPTI and FEMCARE shall
           notify each other in writing to that effect immediately upon becoming
           aware of the same, including if practicable with said written notice
           evidence establishing a case of infringement by such third party.

      (b)  FEMCARE shall have the right, in its sole discretion, but not the
           obligation to bring such suit at its own expense and in its own name,
           if possible, or jointly in its name and in the name of PPTI or if
           necessary in PPTI's sole name.

      (c)  FEMCARE shall bear all the expenses of any suit brought by it and
           shall retain all damages or other monies awarded or received in
           settlement of such suit; provided, however, that at its option
           exercised by notice in writing to FEMCARE before it commences such
           suit PPTI may contribute to the expenses of any such suit and, in
           such event, FEMCARE and PPTI shall share proportionately to their
           respective contributions all damages or other monies awarded or
           received in settlement of such suit.

      (d)  PPTI will cooperate with FEMCARE in any such suit and shall have the
           right to consult with FEMCARE and, if it elects pursuant to the
           proviso to paragraph (c) of this Article, to be separately
           represented by its counsel at its own expense.

14.03 (a)  In the event that there is infringement of a patent of a Joint
           Invention jointly owned by the parties outside the grant provided to
           FEMCARE under Article 3.01 by a third party, PPTI and FEMCARE shall
           notify each other in writing to that effect immediately upon becoming
           aware of the same, including if practicable with said written notice
           evidence establishing a case of infringement by such third party.

                                       37
<PAGE>

      (b)  PPTI and FEMCARE shall meet to analyze the infringement claim, the
           evidence of same and attempt to agree upon a suitable approach for
           addressing said infringement.

15    ARBITRATION OF DISPUTES

15.01 Excepting only actions and claims relating to actions commenced by a third
      party against PPTI or FEMCARE (including, without limitation, for injuries
      caused by a Product or in respect to a trademark or patent infringement
      claim), any controversy or claim arising out of or relating to the terms
      and conditions of this Agreement, or the decision to agree upon these
      terms, or the breach thereof, including questions of validity,
      infringement, or termination hereof, shall be settled exclusively by
      arbitration in accordance with the rules of the American Arbitration
      Association. If such controversy or claim relates to patent validity or
      infringement, then the Patent Arbitration Rules of the AAA shall apply;
      otherwise the International Arbitration Rules of the AAA shall apply.
      Notwithstanding the foregoing to the contrary or in the arbitration rules
      invoked or in this Section 15, the parties retain the right to request a
      judicial authority to invoke interim measures of protection, and such
      request shall not be deemed incompatible with this agreement to arbitrate
      or a waiver of the right to arbitrate.

15.02 There shall be one (1) arbitrator to be mutually agreed upon by the
      parties and to be selected from the Regional Panel of Distinguished
      Neutrals. If the parties are unable to agreeupon such an arbitrator who is
      willing to serve within ten (10) days of receipt of the demand by the
      other party, the parties shall within three (3) days select one of the
      five largest international public accounting firms (excluding those
      providing services to the parties) and engage the managing partner or
      senior officer of its New York City office to designate a partner of such
      firm to serve as the arbitrator. Failing that, then the AAA shall appoint
      an arbitrator willing to serve from the Regional Panel of Distinguished
      Neutrals, or if no such panel exists, then from an appropriate AAA panel.
      It shall be the duty of the arbitrator to set dates for preparation and
      hearing of any dispute and to expedite the resolution of such dispute.

                                       38
<PAGE>

15.03 (a)  The arbitration shall be held in the City of New York, State of New
           York, U.S.A. and the arbitrator shall apply the substantive law of
           Delaware except that the interpretation and enforcement of this
           arbitration provision shall be governed by the Federal Arbitration
           Act.

      (b)  The arbitrator shall permit and facilitate discovery, which will be
           conducted in accordance with the Federal Rules of Civil Procedure,
           taking into account the needs of the parties and the desirability of
           making discovery expeditious and cost-effective.

      (c)  The arbitrator will set a discovery schedule with which the parties
           will comply and attend depositions if requested by either party.

      (d)  The arbitrator will entertain such presentation of sworn testimony or
           evidence, written briefs and/or oral argument as the parties may wish
           to present, but no testimony or exhibits will be admissible unless
           the adverse party was afforded an opportunity to examine such witness
           and to inspect and copy such exhibits during the pre-hearing
           discovery phase.

      (e)  The arbitrator shall among his other powers and authorities, have the
           power and authority to award interim or preliminary relief.

      (f)  The arbitrator shall not be empowered to award either party exemplary
           or punitive damages or any enhanced damages for willful infringement
           and the parties shall be deemed to have waived any right to such
           damages.

      (g)  A qualified court reporter will record and transcribe the proceeding.

      (h)  The decision of the arbitrator will be in writing and judgment upon
           the award by the arbitrator may be entered in any court having
           jurisdiction thereof.

      (i)  Prompt handling and disposal of the issue is important. Accordingly,
           the arbitrator is instructed to assume adequate managerial initiative
           and control over discovery and other aspects of the proceeding to
           schedule discovery and other activities for substantially continuous
           work, thereby expediting the arbitration as much as is deemed
           reasonable to him, but in all events to effect a final award within
           365 days of the arbitrator's selection or appointment and within 20
           days of the close of evidence.

      (j)  The proceedings shall be confidential and the arbitrator shall issue
           appropriate protective orders to safeguard both parties' confidential
           information.

                                       39
<PAGE>

      (k)  The fees of the arbitrator and the AAA shall be paid as designated by
           the arbitrator or, if he shall not so designate, they shall be split
           equally between the parties.

16    NOTICES

16.01 Notices hereunder shall be in writing and shall be deemed to have been
      duly given if personally delivered, mailed by registered mail, return
      receipt requested, or when sent by facsimile or other telegraphic means.
      Such notices shall be effective upon receipt, if by personal delivery, on
      the third business day following date of the receipt for registered mail,
      or if by facsimile, on the date of the confirmation of "ok" transmission.
      Addresses and persons to be notified may be changed by either party by
      giving written notice thereof to the other party.

For FEMCARE:

      FEMCARE UROLOGY LIMITED.
      St. Peter's Street
      Nottingham NG7 3EN United Kingdom
      Attention:  B. Sweeney
      Fax:   011-44-115-942-0234

With a copy to:

      Nelsons Solicitors
      Pennine House, 8 Stanford Street
      Nottingham,  NG1 7BQ
      FAX: 0115 958 9113
      Attention:  David J. Tillcock

                                       40
<PAGE>

For PPTI:

      Protein Polymer Technologies, Inc.
      10655 Sorrento Valley Road
      San Diego, California 92121
      Attention:  President
      Fax: (858) 558-6477

With a copy to:

      Piper Marbury Rudnick & Wolfe
      203 North LaSalle Street, Suite 1800
      Chicago, Illinois 60601
      Fax: (312) 630-5322
      Attention:  John H. Heuberger

17    FORCE MAJEURE

17.01 (a)  Subject to compliance with paragraph (b) of this Article 17 any
           delays in or failure of performance by either party under this
           Agreement shall not be considered a breach of this Agreement if and
           to the extent caused by any occurrences beyond the reasonable control
           of the party affected, including but not limited to: acts of God;
           acts, regulations or laws of any government; strikes or other
           concerted acts of workers; fires; floods; explosions; riots; wars;
           rebellion; embargo; and sabotage; and any time for performance
           hereunder shall be extended by the actual time of delay caused by
           such occurrence.

      (b)  Any party affected by such force majeure who wishes to rely on the
           provisions of paragraph (a) of this Article shall as soon as
           reasonably practicable give notice to the other party specifying the
           matters constituting force majeure together with such evidence

                                       41
<PAGE>

           thereof as it can reasonable give and specifying the period for which
           it is estimated that the such delay will continue.

18    SAVINGS PROVISION

18.01 The invalidity of any provision of this Agreement shall not impair the
      validity of any other provision; and any provision hereof which might
      otherwise be invalid or contravene any applicable law shall hereby be
      deemed to be amended to the extent necessary to remove the cause of such
      invalidity and to the extent practicable to continue the intent of such
      provision and of this Agreement, and such provision, as so amended, shall
      remain in full force and effect as a part hereof.

19    RELATIONSHIP OF PARTIES

19.01 Each party shall act as an independent contractor in carrying out its
      obligations under this Agreement. Nothing contained in this Agreement
      shall be construed to imply a joint venture, partnership or principal-
      agent relationship between the parties, and neither party by virtue of
      this Agreement shall have the right, power or authority to act or create
      any obligation, express or implied, on behalf of the other party. This
      Agreement shall not be construed to create rights, express or implied, on
      behalf of or for the use of any party aside from FEMCARE and PPTI, and
      neither party shall be obligated, separately or jointly, to any third
      parties by virtue of this Agreement.

20    WARRANTIES

20.01 FEMCARE warrants that it shall use its best efforts to comply with all
      laws applicable to the purchase, storage, transport, labeling,
      distribution or Commercialization by it of the Product in the Territories,
      shall comply with the U.S. Export Administration laws and regulations and
      shall not export or re-export any technical data or Intellectual Property,
      or the direct products of such technical data or Intellectual Property, or
      Products to any

                                       42
<PAGE>

      prohibited country listed in the U.S. Export Administration Regulations
      unless properly authorized to do so by the U.S. government.

20.02 PPTI represents and warrants to FEMCARE that the following statements are
      true and accurate in all material respects as follows:

      (a)  To its knowledge and belief, it has sufficient right and title to and
           ownership of, free and clear of all liens, claims and encumbrances of
           any nature, the Intellectual Property to grant to FEMCARE the various
           rights and Licenses granted to FEMCARE under this Agreement;

      (b)  It has not done and subject to clause 23, will not do nor agree to do
           during the term of this Agreement, any of the following things if to
           do so would be materially inconsistent with the exercise by FEMCARE
           of the rights granted to it under this Agreement, assign, mortgage,
           hypothecate, or otherwise transfer any of the Patents or any of its
           rights or obligations under this Agreement;

      (c)  It is not aware that any third party owns any rights in the
           Intellectual Property;

      (d)  It is not aware that any third party owns any rights which would be
           infringed by the use of the Patents in accordance with provisions of
           this Agreement;

      (e)  It has reasonable grounds for believing that the Product in its
           present form will constitute substantially the Product for
           Commercialization in the Territories;

      (f)  There is no information known to PPTI concerning the Product not
           previously incorporated in the IDE *** or disclosed to FEMCARE which
           indicates that it may not be safe for administration to humans or
           that the development and Commercialization of the Product would not
           be commercially successful.

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                       43
<PAGE>

      (h)  To PPTI's knowledge as of the date of this Agreement, no corporation,
           limited liability partnership or partnership which has more than 250
           employees and either an annual turnover which exceeds Euro 40 million
           or an annual balance sheet total exceeding Euro 27 million owns more
           than 25% of the share capital or voting rights of PPTI.

21    INTEGRATION AND CONFLICT

21.01 (a)  It is the mutual desire and intent of the parties to provide
           certainty as to their future rights and remedies against each other
           by defining the extent of their mutual undertakings provided herein.
           The parties have in this Agreement and in the related Supply
           Agreement and Escrow Agreement incorporated the representations,
           warranties, covenants, commitments and understandings on which they
           have relied in entering into this Agreement and, except as provided
           for herein and in the Supply Agreement and Escrow Agreement, neither
           party has made any undertaking or other commitment to the other
           concerning its future activities. Accordingly, this Agreement and the
           related Supply Agreement and Escrow Agreement:

           (i)     constitute the entire agreement and understanding between the
                   parties with respect to the subject matter contained herein,
                   and there are no promises, representations, conditions,
                   provisions or terms related thereto other than as set forth
                   in this Agreement and the related Supply Agreement and Escrow
                   Agreement; and

           (ii)    supersede all previous understandings and agreements, and
                   representations between the parties, whether written or oral,
                   relating to the subject matter.

      (b)  The parties may from time to time during the term of this Agreement
           modify any of its provisions by mutual agreement in writing.

                                       44
<PAGE>

      (c)  The parties agree that each has had the opportunity to be represented
           by counsel of it choosing including the negotiations that preceded
           this Agreement.

      (d)  In the event of any conflict between the provisions of this Agreement
           and the Supply Agreement, unless expressly stated in this Agreement,
           the provisions of this Agreement shall prevail.

22    GOVERNING LAW

22.01 This Agreement shall be construed and the rights of the parties shall be
      determined in accordance with the substantive laws of the State of
      Delaware, without regard to its conflict of laws principles, except that
      the Arbitration provisions contained herein shall be governed as stated in
      Section 15.

23    ASSIGNMENT

23.01 Except as specifically provided herein each party in its sole discretion,
      may assign or transfer all or a portion of its rights under this Agreement
      to any of its Affiliates, or designate or cause any Affiliate to have the
      benefit of all or a portion of its rights hereunder; provided, however,
      that any such party shall remain liable for the performance by its
      Affiliate under this Agreement. Also, either party may assign this
      Agreement to a party purchasing substantially all of the assets or
      operations of such party. Except as herein provided, neither party shall
      assign or otherwise transfer this Agreement or any part hereof to any
      third party without the prior written permission of the other party.

24    BANKRUPTCY

24.01 All rights and licenses granted under or pursuant to this Agreement by a
      party acting as licensor to the other party as licensee are, and shall
      otherwise be deemed to be, for purposes of Section 365(n) of Title 11,
      U.S. Code (the "Bankruptcy Code") licenses of rights to "intellectual

                                       45
<PAGE>

      property" as defined under Section 101(60) of the Bankruptcy Code. The
      parties agree that a licensee of such rights under this Agreement, shall
      retain and may fully exercise all of its rights and elections under the
      Bankruptcy Code. The licensor of such rights agrees during the term of
      this Agreement to create and maintain current copies or, if not amenable
      to copying, detailed descriptions or other appropriate embodiments, of all
      such intellectual property. The parties further agree that, in the event
      of the commencement of a bankruptcy proceeding by or against the licensor
      under the Bankruptcy Code, the licensee shall be entitled to a complete
      duplicate of (or complete access to, as appropriate) any such intellectual
      property and all embodiments of such intellectual property, and same, if
      not already in its possession, shall be promptly delivered to licensee (i)
      upon any such commencement of a bankruptcy proceeding upon written request
      therefor by the licensee, unless licensor elects to continue to perform
      all of its obligations under this Agreement, or [(ii) if not delivered
      under (i) above, upon the rejection of this Agreement by or on behalf of
      licensor upon written request therefor by licensee.

                                       46
<PAGE>

IN WITNESS WHEREOF, and FEMCARE have caused this Agreement to be executed in
duplicate by their fully authorized representatives.

PROTEIN POLYMERS, INC                       FEMCARE

By:  /s/ Thomas Parmeter                    By:  /s/ Bernard Sweeney
   ---------------------------                 ---------------------------
     Thomas Parmeter                             Bernard Sweeney
     President and CEO                           Managing Director

Date January 26, 2000                       Date     January 26, 2000
    --------------------------                  --------------------------

THE UNDERSIGNED PARENT COMPANY OF PROSPECTIVEPIERCING LIMITED (TO BECOME FEMCARE
UROLOGY LIMITED), TO INDUCE PROTEIN POLYMER TECHNOLOGIES, INC. TO ENTER INTO
THIS AGREEMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT,
ADEQUACY AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, HEREBY IRREVOCABLY AND
UNCONDITIONALLY GUARANTEES THE TIMELY AND FULL PERFORMANCE AND PAYMENTS UNDER
THIS AGREEMENT BY PROSPECTIVEPIERCING LIMITED AND AGREES THAT IT SHALL BE BOUND
BY THE ARBITRATION PROVISIONS HEREIN AS IF A FULL PARTY HERETO.

                Date:     January 26, 2000
                     ----------------------------

By:   /s/ Bernard Sweeney
   ------------------------------
      Bernard Sweeney
      Managing Director

                                       47
<PAGE>

                                   SCHEDULE A

                              Schedule of Patents
                              -------------------

<TABLE>
<CAPTION>

                                                                                      Corresponding
                                                                                  International Patents
Patent Number                  Issue Date                  Title                   and/or Applications
--------------                 -----------        -------------------------      -------------------------
<S>                            <C>                <C>                            <C>

U.S. 5,243,038                 Sep 7, 1993        Construction of Synthetic      PCT/US87/02822: Issued in
                                                  DNA and Its Use in Large       Australia, Finland, New
                                                  Polypeptide Synthesis          Zealand; ***

U.S. 5,606,019                 Feb 25, 1997       Synthetic Proteins as          PCT/US95/02772: ***
                                                  Implantables

U.S. 5,770,697                 Jun 23, 1998       Peptides Comprising            Not Applicable
                                                  Repetitive Units of Amino
                                                  Acids and DNA Sequences
                                                  Encoding the Same

Patent Application Number      Filing Date        Title                          Corresponding
                                                                                 International Patents
                                                                                 and/or Applications

PCT/US89/05016                 Nov 7, 1989        Functional Recombinantly       Issued in Australia,
                                                  Prepared Synthetic Protein     Europe, Finland, Norway,
                                                  Polymer                        South Korea; ***

U.S. S/N 08/482,085            Jun 7, 1995        Peptides Comprising            Not Applicable
                                                  Repetitive Units of Amino
                                                  Acids and DNA Sequences
                                                  Encoding the Same

***                            ***                ***                            ***

***                            ***                ***                            ***
***                            ***                ***                            ***

</TABLE>

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                      A-1
<PAGE>

                                   SCHEDULE B

             PRODUCT DEVELOPMENT AND REGULATORY APPROVAL MILESTONES

MILESTONE                                       TARGET DATE
---------                                       -----------

BEGIN NON-U.S. CLINICAL EFFICACY TRILAS         ***

BEGIN EUROPEAN PRODUCT SALES                    ***

BEGIN AUSTRALIAN PRODUCT SALES                  ***

BEGIN MINIMUM ROYALTY PERIOD                    ***

*  Provided that any failure to achieve this Performance Benchmark shall not
give rise to a right of termination of this Agreement even if the failure is not
cured within the required time period.  In the event of such failure, FEMCARE's
license for Australia hereunder shall cease to be exclusive and shall become
non-exclusive for remaining term of, and subject to,  this Agreement.

------------------------
***   Material is confidential and has been omitted and filed separately with
the Securities and Exchange Commission.

                                      B-1
<PAGE>

                                   SCHEDULE C

***

------------------------
***   Material is confidential and has been omitted and filed separately with
the Securities and Exchange Commission.

                                      C-1
<PAGE>

                                   SCHEDULE D

                            LIST OF THE TERRITORIES

                                  TERRITORIES

                    Norway                         France
                    Finland                        Germany
                    Iceland                        Greece
                    Liechtenstein                  Ireland
                    Sweden                         Italy
                    Switzerland                    Luxembourg
                    Hungary                        Netherlands
                    Poland                         Portugal
                    Austria                        Spain
                    Belgium                        UK
                    Denmark                        Australia

     ***

------------------------
***   Material is confidential and has been omitted and filed separately with
      the Securities and Exchange Commission.

                                      D-1

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