Document:

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                                  EXHIBIT 10.39

                           NOTE MODIFICATION AGREEMENT

         This Note Modification Agreement is entered into as of April 12, 2000
by and between Hudson Hotels Properties Corp., ("Borrower") and Equity Inns
Partnership, L.P. ("Lender").

                  WHEREAS, Borrower has previously executed and delivered to
         Lender its Promissory Note in the principal amount of $3,884,052.23
         dated as of October 31, 1997 which Note was modified pursuant to Note
         Modification Agreement dated October 31, 1998; and

                  WHEREAS, there is currently outstanding under the Note the
         principal sum of $2,634,052.23, payment of which is in default; and

                  WHEREAS, Borrower and Lender have agreed to modify the terms
         of the Promissory Note as set forth herein and to reinstate the
         Promissory Note in good standing:

                  NOW, THEREFORE, be it resolved, that for and in consideration
         of the mutual agreements set forth herein, Borrower and Lender hereby
         agree:

         1.       The definition of Maturity Date set forth in Section 1 of the
                  Promissory Note shall be amended to read as follows:

                  "MATURITY DATE" SHALL MEAN APRIL 1, 2006.

         2.       Section 4 of the Promissory Note, Principal Payments, shall be
                  amended and restated as follows:

                  "4.      PAYMENTS.

                           (a)      BORROWER SHALL PAY INTEREST ONLY MONTHLY ON
                                    THE FIRST DAY OF EACH MONTH, COMMENCING MAY
                                    1, 2000 AND CONTINUING THROUGH APRIL 1,
                                    2001.

                           (b)      COMMENCING MAY 1, 2001, BORROWER SHALL MAKE
                                    59 EQUAL AMORTIZING MONTHLY PAYMENTS OF
                                    PRINCIPAL AND INTEREST IN THE AMOUNT OF
                                    $34,809.19 EACH.

                           (c)      THE REMAINING BALANCE OF PRINCIPAL, PLUS
                                    ACCRUED BUT UNPAID INTEREST, SHALL BE DUE ON
                                    THE MATURITY DATE".

         3.       Except as stated herein, the Promissory Note shall remain in
                  full force and effect, unamended.

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         IN WITNESS WHEREOF, the parties have executed this Note Modification
Agreement to be effective as of the date above written.

                                         HUDSON HOTELS PROPERTIES CORP.

                                         By: /s/ E. Anthony Wilson
                                             -------------------------------

                                         EQUITY INNS PARTNERSHIP, L.P.
                                         By:  Equity Inns Trust, General Partner

                                         By: /s/ Howard Silver
                                             -------------------------------<PAGE>

                                                                   Exhibit 10.88

                                LICENSE AGREEMENT

      This License Agreement is entered into and made effective as of this
____day of June, 1999, by and between THE SCRIPPS RESEARCH INSTITUTE, a
California nonprofit public benefit corporation ("Scripps") located at 10550
North Torrey Pines Road, La Jolla, California 92037, and STEMCELLS, INC., a
California corporation ("Licensee") with offices at 701 George Washington
Highway, Lincoln, Rhode Island 02865, a wholly-owned subsidiary of
CytoTherapeutics, Inc. ("CTI"), with respect to the facts set forth below.

                                    RECITALS

      A. Scripps and Licensee have entered into a Research Funding and Option
Agreement effective as of November 14, 1997 (the "Research Agreement"), pursuant
to which Licensee agreed to fund certain research conducted in Dr. Nora
Sarvetnick's laboratory at Scripps (the "Research Program").

      B. Scripps is engaged in fundamental scientific biomedical and biochemical
research, including research relating to pancreatic stem and progenitor cells,
as more particularly described herein.

      C. Licensee is engaged in research and development of stem and progenitor
cells for the diagnosis, treatment and prophylaxis of diseases and other
conditions in humans and animals.

      D. Scripps has disclosed to Licensee certain technology described in that
certain invention disclosure, a copy of which is attached hereto as Exhibit A
and incorporated herein by reference (the "Invention(s)")

      E. Scripps has the exclusive right to grant a license to the technology
described in Exhibit A, subject to certain rights of the U.S. Government to use
such technology for its own purposes, resulting from the receipt by Scripps of
certain funding from the U. S. Government.

      F. Scripps desires to grant to Licensee, and Licensee wishes to acquire,
an exclusive worldwide right and license to the technology described in the
Exhibit A and to certain patent rights and know-how of Scripps with respect
thereto, subject to the terms and conditions set forth herein, with a view to
developing and marketing products within the Field (as defined below).

                                    AGREEMENT

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

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

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

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

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

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

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

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

      1.3 Field. The term "Field" shall mean all medical applications of the
Scripps Patent Rights and Scripps Technology in humans and animals.

      1.4 Licensed Product. The term "Licensed Product" shall mean a product,
the manufacture, sale or use of which would but for the license granted herein,
infringe a Valid Claim in the country for which such product is sold. Without
limiting the foregoing, Licensed Product shall also include a product the
manufacture, sale or use of a particular product would but for the license
granted herein infringe a Valid Claim in the United States and at least two (2)
Major Countries, in such case irrespective of where such product is made, sold
or used and irrespective of whether such product is covered by a Valid Claim in
the country where sold.

      1.5 Major Countries. The term "Major Countries" shall mean France,
Germany, Italy and the United Kingdom.

      1.6 Net Sales. The term "Net Sales" shall mean the total amount invoiced
to third parties on sales of Licensed Products by Licensee, its Affiliates, or
Sublicensees, for which royalties are due under Article 3 below, less the
following reasonable and customary deductions to the extent applicable to such
invoiced amounts: (i) all trade, cash and quantity credits, discounts, refunds
or government rebates; (ii) amounts for claims, allowances or credits for
returns, retroactive price reductions, or chargebacks; (iii) packaging, handling
fees and prepaid freight, sales taxes, duties and other governmental charges
(including value added tax); and (iv) provisions for uncollectible accounts
determined in accordance with reasonable accounting practices, consistently
applied to all

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products of the selling party; provided, however, that in the case of
Patient-Specific Licensed Products, "Net Sales" shall equal thirty percent (30%)
of the foregoing amounts (after the deductions described in (i) through (iv)
above). For purposes of the foregoing, it is understood that Net Sales shall
include only the amount invoiced for materials consisting of Licensed Products
(less the foregoing deductions and adjustments) and shall not include charges
related to services (other than cell separation and expansion) performed in
connection with the sale of such Licensed Products; accordingly, Net Sales shall
not include, without limitation, charges for apheresis, reinfusion, surgical
procedures, hospital stays or the like. For the removal of doubt, Net Sales
shall not include sales by Licensee to its Affiliates for resale, provided that
if Licensee sells a Licensed Product to an Affiliate for resale, Net Sales shall
include the amounts invoiced by such Affiliate to third parties on the resale of
such Licensed Product. In the event that Licensee grants a sublicense hereunder,
and receives payments based upon the Sublicensee's sales of Licensed Products,
Licensee may upon approval by Scripps, which approval shall not be unreasonably
withheld, substitute the definition of "Net Sales," used by the Sublicensee to
calculate payments to Licensee in place of the foregoing definition of "Net
Sales" for purposes of calculating royalties payable to Scripps on such
Sublicensee's sales.

      1.7 Patient-Specific Licensed Product. The term "Patient-Specific Licensed
Product shall mean a Licensed Product that includes either (i) autologous cells
from the patient; or (ii) nonautologous cells that otherwise are not intended
for use in all patients (such as Licensed Products that are fetal cells
expressing an HLA-type compatible with the particular patient but not optimally
compatible with patients who have a different HLA type).

      1.8 Scripps Patent Rights. The term "Scripps Patent Rights" shall mean all
rights resulting from:

            (a) all worldwide patent and patent applications claiming the
      Scripps Technology described in Exhibit A hereto (the "Existing Patents");
      and

            (b) all divisions, continuations, continuations-in-part, patents of
      addition, and substitutions of the Existing Patents, together with all
      registrations, reissues, reexaminations or extensions of any kind with
      respect to any of the foregoing patents to the extent the same claim
      Scripps Technology.

      From time to time during the term of this Agreement the parties agree to
record and update on Exhibit B all patents and patent applications within the
Scripps Patent Rights

      In the event that Scripps and Licensee are joint owners of an invention by
reason of the fact that personnel of both Scripps and Licensee are joint
inventors of such invention, it is understood that the Scripps Patent Rights
include only Scripps' rights as a joint owner of the patent applications and
patents that claim such joint invention.

      1.9 Scripps Technology. The term "Scripps Technology" shall mean so much
of the technology as is proprietary to Scripps that was developed in performance
of the Research Program and in the disclosure provided to Licensee pursuant to
Section 3.2 or 3.3 of the Research

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Agreement, a copy of which is attached as Exhibit A hereto and incorporated
herein by reference, together with materials, information and know-how related
thereto from the Research Program as described Exhibit A whether or not the same
is eligible for protection under the patent laws of the United States or
elsewhere, and whether or not any such processes and technology, or information
related thereto, would be enforceable as a trade secret or the copying of which
would be enjoined or restrained by a court as constituting unfair competition.

      1.10 Sublicensee. The term "Sublicensee" shall mean any non-Affiliate
third party to whom Licensee has granted the right to manufacture and sell
Licensed Products, with respect to Licensed Products made and sold by such third
party.

      1.11 Valid Claim. The term "Valid Claim" shall mean a claim of an issued
and unexpired patent or a claim of a pending patent application within the
Scripps Patent Rights which has not been held unpatentable, invalid or
unenforceable by a court or other government agency of competent jurisdiction
and has not been admitted to be invalid or unenforceable through reissue,
reexamination, disclaimer or otherwise; provided, however, that if the holding
of such court or agency is later reversed by a court or agency with overriding
authority, the claim shall be reinstated as a Valid Claim with respect to Net
Sales made after the date of such reversal. Notwithstanding the foregoing
provisions of this Section 1.11, if a claim of a pending patent application
within the Scripps Patent Rights has not issued as a claim of an issued patent
within the Scripps Patent Rights, within five (5) years after the filing date
from which such claim takes priority, such pending claim shall not be a Valid
Claim for purposes of this Agreement.

2. License Terms and Conditions.

      2.1 Grant of License.

      (a) Scripps hereby grants to Licensee an exclusive, worldwide license,
including the right to sublicense, to: make, use, sell, import, export or
otherwise distribute Licensed Products; practice any method, process or
procedure, and otherwise exploit the Scripps Patent Rights; and to have any of
the foregoing performed on its behalf by a third party, in each case solely
within the Field, subject to the terms of this Agreement.

      (b) Scripps hereby grants to Licensee a non-exclusive, worldwide license,
including the right to sublicense to and under the Scripps Technology for the
purpose of exercising its rights and licenses under the Scripps Patent Rights.

      2.2 Royalties. In consideration for the exclusive license granted pursuant
to Section 2.1 hereof, Licensee shall pay to Scripps a continuing royalty the
following percentages of Net Sales of each Licensed Product by Licensee, its
Affiliates and Sublicensees: (i) two percent (2%) of Net Sales in Patent
Countries and (ii) one percent (1%) in Non-Patent Countries. For purposes of
calculating royalties due hereunder, a "Patent Country" shall mean, with respect
to a particular Licensed Product, a country in which at the time of the sale of
such Licensed Product in such country, the manufacture, use or sale of such
Licensed Product would infringe a Valid Claim in

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such country; and a "Non-Patent Country" shall mean, with respect to such
Licensed Product, a country which a the time of sale of such Licensed Product in
such country is not a Patent Country.

      2.3 Milestone Payments. As additional consideration for the exclusive
license granted pursuant to Section 2.1 hereof, Licensee agrees to pay to
Scripps upon the first occurrence of each milestone specified below for the
first Licensed Product to meet such milestone:

            MILESTONES                                             PAYMENT
            ----------                                             -------

1.    First initiation of Phase II Trials for the first           $50,000
      Licensed Product.

2.    First initiation of Phase III Trials for the first          $125,000
      Licensed Product.

3.    First receipt of government approval to                     $250,000
      market and distribute the first Licensed
      Product in the United States or the first Major
      Country.

For purposes of the foregoing milestones, "Phase II Trials" shall mean that
portion of the clinical studies for the FDA submission and approval process
which provides for the initial trials of a Licensed Product for the purposes of
determining the efficacious therapeutic dose range and evaluating safety in the
proposed therapeutic indication as more fully defined in 21 C.F.R. ss.
312.21(b), or a similar clinical study in a country other than the United
States; and "Phase III Trials" shall mean that portion of the clinical studies
for the FDA submission and approval process which provides for trials of a
Licensed Product on sufficient numbers of patients to establish the safety and
efficacy of such Licensed Product to support regulatory approval in the proposed
application as more fully defined in 21 C.F.R. ss. 3122.21(c), or similar
clinical study in a country other than the United States.

      2.4 Combination Products.

            2.4.1 Definition of Combination Product. As used herein, the term
"Combination Product" shall mean a Licensed Product which cannot be
manufactured, used or sold without infringing Scripps Patent Rights licensed
hereunder in the country where sold which is sold with another product,
component or service for which no royalty would be due hereunder if sold
separately.

            2.4.2 Royalty Payable on Combination Products. The royalty payable
on Combination Products shall be the royalty rate set forth in Section 2.2 above
based on a pro rata portion of Net Sales of Combination Products in accordance
with the following formula:

                              A
                              X= -

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                              A + B, where

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

                  A = the fair market value of the Licensed Product component,
                  and

                  B = the fair market value of all other components (product,
                  component or service) in the Combination Product.

The fair market values described above shall be determined by the parties hereto
in good faith. Notwithstanding the foregoing, in the event that there is no
separate fair market values of the Licensed Product and such other product(s),
component(s) and/or services(s), then the Net Sales shall be as reasonably
allocated by Licensee between such Licensed Product and such other product(s),
component(s) and/or service(s), based upon their relative importance and
proprietary position, subject to the consent of Scripps, which consent shall not
be unreasonably withheld.

      2. 5 Multiple Royalties. If Licensee, its Affiliate or Sublicensee is
required to pay a non-Affiliate third party amounts with respect to a Licensed
Product under agreements for patent rights or other technologies which Licensee,
its Affiliate or Sublicensee, in its reasonable judgment, determines are
necessary or desirable to license or acquire with respect to such Licensed
Product, Licensee may deduct such amount owing to such non-Affiliate third
parties (prior to any reductions) from the royalty owing to Scripps for the sale
of such Licensed Product pursuant to Section 2.2 above. Notwithstanding the
foregoing provisions of this Section 2.5, in no event shall the royalties due to
Scripps pursuant to Section 2.2 above be so reduced to less than fifty percent
(50%) of the amount that would otherwise be due Scripps thereunder.

      2.6 Quarterly Payments.

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

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

      2. 7 Term of License. Unless terminated sooner in accordance with the
provisions of this Agreement, the term of this license shall expire when the
last of the royalty obligations set forth has expired (i.e., until expiration,
revocation or invalidation of the last patent or the abandonment of the

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last application within the Scripps Patent Rights, whichever is later).
Notwithstanding the foregoing, if applicable government regulations require a
shorter term and/or a shorter term of exclusivity than provided for herein, then
the term of this License Agreement shall be so shortened or this License
Agreement shall be amended to provide for a non-exclusive license, and, in such
event, the parties shall negotiate in good faith to reduce appropriately the
royalties payable as set forth under the section heading "Royalties" hereof.
Notwithstanding anything herein to the contrary, Licensee's license under
Section 2.l(b) with respect to the Scripps Technology shall survive the
expiration, (but not an earlier termination, except as provided in Section 8.6
below) of this Agreement.

      2.8 Sublicense. Licensee shall have the sole and exclusive right to grant
sublicenses to any party with respect to the rights conferred upon Licensee
under this Agreement, provided, however, that any such sublicense shall be
subject in all respects to the restrictions, exceptions, royalty obligations,
reports, termination provisions, and other provisions contained in this
Agreement. Without limiting the foregoing, Licensee agrees to provide Scripps a
copy of each such sublicense agreement within thirty (30) days of the execution
thereof. Licensee shall pay Scripps, or cause its Affiliate or Sublicensee to
pay Scripps, the same royalties on all Net Sales of such Affiliate or
Sublicensee the same as if said Net Sales had been made by Licensee. Each
Affiliate and Sublicensee shall report its Net Sales to Scripps through
Licensee, which Net Sales shall be aggregated with any Net Sales of Licensee for
purposes of determining the Net Sales upon which royalties are to be paid to
Scripps.

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

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

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      2.11 Foreign Sales. The remittance of royalties payable on sales outside
the United States shall be payable to Scripps in United States Dollar
equivalents at the official rate of exchange of the currency of the country from
which the royalties are payable, as quoted in the Wall Street Journal for the
last business day of the calendar quarter in which the royalties are payable. If
the transfer of or the conversion into the United States Dollar equivalents of
any such remittance in any such instance is not lawful or possible, the payment
of such part of the royalties as is necessary shall be made by the deposit
thereof, in the currency of the county where the sale was made on which the
royalty was based to the credit and account of Scripps or its nominee in any
commercial bank or trust company of Scripps' choice located in that country,
prompt written notice of which shall be given by Licensee to Scripps and except
as set forth in Section 2.10 above, Licensee shall have no further obligation
with respect to such royalties.

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

      2.13 Single Payments. The parties hereto acknowledge that the parties may
enter into multiple license agreements with respect to technologies arising out
of the Research Agreement, including this Agreement (collectively, the "Scripps
License Agreements") pursuant to which Licensee will owe royalties and milestone
payments. Notwithstanding anything herein to the contrary, with respect to any
unit of Licensed Product only a single royalty shall be due to Scripps at the
highest applicable rate for such unit regardless if such Licensed Product is
covered by more than one Valid Claim or would be a Licensed Product under more
than one Scripps License Agreement. (For example, if a product sold by Licensee
is a Licensed Product under this Agreement for which Licensee owes Scripps a
royalty of 2% of Net Sales and Licensee would otherwise owe Scripps a royalty of
1% of Net Sales of such product under another Scripps License Agreement,
Licensee's royalty obligation to Scripps shall be fulfilled by paying Scripps 2%
of Net Sales with respect to sales of such License Product.) Likewise, with
respect to the milestone payments under Section 2.3 above, once such milestone
payment has been paid for a Licensed Product under any Scripps License Agreement
then Licensee's obligation to pay such milestone shall be deemed to be fulfilled
with respect to all Scripps License Agreement, regardless of whether the product
for which such a milestone payment was paid was a "Licensed Product" for
purposes of a particular Scripps License Agreement or not. (For example, if a
Licensee initiates Phase II Trials for a product, which product falls within the
definition of "Licensed Product" under this Agreement and pays Scripps the
corresponding $50,000 payment, Licensee shall have no further obligation to pay
any amounts to Scripps with respect to any other product under any Scripps
License Agreement upon the initiation of Phase II Trials for a Licensed Product
whether or not the product for which Licensee initially paid such milestone
payment is a Licensed Product for purposes of any other Scripps License
Agreement.)

3. Patent Matters.

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

      3.2 Information to Licensee. Scripps agrees to use reasonable efforts to
(i) keep Licensee informed as to the filing, prosecution and maintenance of
patents and patent applications within the Scripps Patent Rights, (ii) furnish
to Licensee copies of documents relevant to any such filing, prosecution and
maintenance and (iii) allow Licensee reasonable opportunity to comment on
documents filed with any patent office which would affect the Scripps Patent
Rights or Licensee' rights hereunder.

      3.3 Patent Costs. Licensee acknowledges and agrees that Scripps does not
have independent funding to cover patent costs, and that the license granted
hereunder is in part in consideration for Licensee's assumption of patent costs
and expenses as described herein. Licensee shall pay for all expenses incurred
by Scripps pursuant to Section 3.1 hereof. In addition, Licensee agrees to
reimburse Scripps for all patent costs and expenses paid or incurred by Scripps
to date inconnection with Scripps Patent Rights licensed hereunder. Licensee
agrees to pay all such past and future patent expenses directly or to reimburse
Scripps for the payment of such expenses within sixty (60) days after Licensee
receives an itemized invoice therefor. In the event Licensee elects to
discontinue payment for the filing, prosecution and/or maintenance of any patent
application and/or patent within Scripps Patent Rights, any such patent
application or patent shall be excluded from the definition of Scripps Patent
Rights and from the scope of the license granted under this Agreement, and all
rights relating thereto shall revert to Scripps and may be freely licensed by
Scripps. Licensee shall give Scripps at least sixty (60) days' prior written
notice of such election. No such notice shall have any effect on Licensee's
obligations to pay expenses incurred up to the effective date of such election.

      3.4 Ownership. Subject to any joint or mutual ownership of Licensee by
virtue of joint inventorship of inventions covered therein, the patent
applications filed and patent applications obtained by Scripps pursuant to
Section 3.1 hereof shall be owned solely by Scripps, assigned to Scripps and
deemed a part of Scripps Patent Rights.

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

      3.6 Prosecution by Licensee. If Scripps elects not to file, prosecute or
maintain any patent application or patent within the Scripps Patent Rights or
pay any fee related thereto, in any country Scripps shall promptly notify
Licensee of such election, but in no case later than sixty (60) prior to any
required action relating to the filing, prosecution or maintenance of such
patent application or patent. In such event, if Licensee elects to take over the
filing, prosecution and/or maintenance of one or more patents or patent
applications within the Scripps Patent Rights, Licensee shall have the right, at
its option, to control the filing, prosecution and/or maintenance of any such
patent applications or patents within the Scripps Patent Rights at its own
expense. In which case Licensee shall keep Scripps reasonably informed on
matters regarding such filing, prosecution and maintenance.

      3.7   Infringement.

            3 .7.1 Enforcement. If either party determines that a third party is
making, using or selling a product that may infringe the Scripps Patent Rights,
that party shall notify the other party in writing.

            (a) Licensee shall have the first right (itself or through others),
at its sole option, to bring suit to enforce the Scripps Patent Rights, and/or
to defend any declaratory judgment action with respect thereto, in each case
with respect to the manufacture, sale or use of a product within the Field;
provided, however, that Licensee shall keep Scripps reasonably informed as to
the defense and/or settlement of such action. Scripps shall have the right to
participate in any such action with counsel of its own choice at its own
expense.

            (b) In the event Licensee elects not to initiate an action to
enforce the Scripps Patent Rights against a commercially significant
infringement by a third party within the Field, within one (1) year of a request
by Scripps to do so, (or within such shorter period which may be required to
preserve the legal rights of Scripps under the laws of the relevant government),
Scripps may initiate such action at its expense with Licensee's prior written
consent, which consent shall not be unreasonably withheld. Licensee shall have
the right to participate in any such action with counsel of its own choice at
its own expense.

            (c) All recoveries received by a party from an action to enforce the
Scripps Patent Rights shall be first applied to reimburse the controlling
party's and then the non-controlling party's unreimbursed expenses, including
without limitation, reasonable attorney's fees and court costs. Any remainder
shall, to the extent the same pertains to an infringement of the Scripps Patent
Rights, be divided seventy percent (70%) to Licensee and thirty percent (30%) to
Scripps.

                                       10
<PAGE>

            3.7.2 Defense. If Licensee, its Affiliate, Sublicensee, distributor
or other customer is sued by a third party charging infringement of patent
rights that dominate a claim of the Scripps Patent Rights or that cover other
Related Material with respect to the manufacture, use, distribution or sale of a
Licensed Product, Licensee will promptly notify Scripps. As between the parties
to this Agreement, Licensee will be entitled to control the defense in any such
action(s) and withhold one-half (1/2) of the royalties related to such Licensed
Product otherwise payable to Scripps and use the withheld royalties to reimburse
the legal defense costs, attorneys' fees and liability incurred in such
infringement suit(s). Notwithstanding the foregoing, Licensee agrees to withhold
only that portion of such royalties as may reasonably be necessary to reimburse
amounts in accordance with this Section 3.7.2. If Licensee is required to pay a
royalty to a third party to make and/or sell a Licensed Product as a result of a
final judgment or settlement, such amounts may be deducted from the running
royalties payable to Scripps hereunder in relation to such Licensed Product;
provided that such royalties shall not be so reduced by more than fifty percent
(50%). Subject to the provisions of Section 4.3 below, Licensee agrees to
indemnify and hold Scripps harmless from any costs, expenses or liability
arising out of all such infringements or charges of infringement.

            3.7.3 Cooperation. In any suit, action or other proceeding in
connection with enforcement and/or defense of the Scripps Patent Rights, each
party hereto agrees to cooperate fully, including without limitation by joining
as a party plaintiff and executing such documents as the other party may
reasonably request. Without limiting the foregoing, upon the request of and, at
the expense of a party controlling any suit, action or other proceeding pursuant
to this Article 3, the other party shall make available at reasonable times and
under appropriate conditions all relevant personnel, records, papers,
information, samples, specimens and other similar materials in such other
party's possession.

            3.7.4 No Implied Obligations. Except as expressly provided in this
Section 3.7, neither party has any obligation to bring or prosecute actions or
suits against any third party for patent infringement.

4. Obligations Related to Commercialization.

      4.1 Commercial Development Obligation. In order to maintain the license
granted hereunder in force, Licensee shall use reasonable efforts and due
diligence to develop Scripps Technology and Scripps Patent Rights which are
licensed hereunder into commercially viable Licensed Products, as promptly as is
reasonably and commercially feasible, and thereafter to produce and sell
reasonable quantities of Licensed Products. Licensee shall keep Scripps
generally informed as to Licensee's progress in such development, production and
sale, including its efforts, if any, to sublicense Scripps Technology and
Scripps Patent Rights, and Licensee shall deliver to Scripps an annual written
report and such other reports as Scripps may reasonably request. The parties
hereto acknowledge and agree that achievement of mutually agreeable milestones
shall be evidence of compliance by Licensee with its commercial development
obligations hereunder. Notwithstanding the foregoing, if Licensee believes that
it cannot, within the exercise of prudent and reasonable business judgment,
perform any mutually agreed upon milestones within the time period required
therefor, Licensee may request an extension of time for the performance date to
a date that Licensee believes to be reasonable and prudent and Scripps shall
agree to any requested

                                       11
<PAGE>

extension which is not more than one (l) year in length from the originally
required date and will not unreasonably withhold consent to requests for longer
extensions. In the event Scripps has a reasonable basis to believe that Licensee
is not using reasonable efforts and due diligence as required hereunder, upon
notice by Scripps to Licensee which specifies the basis for such belief, Scripps
and Licensee shall negotiate in good faith to attempt to mutually resolve the
issue. In the event Scripps and Licensee cannot agree upon any matter related to
Licensee's commercial development obligations, the parties agree to utilize
arbitration pursuant to Section 10.2 hereof in order to resolve the matter. If
the arbitrator determines that Licensee has not complied with its obligations
hereunder, and such default is not cured within sixty (60) days after the
arbitrator's decision, Scripps may terminate Licensee's rights under this
Agreement.

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

      4.3 Indemnity. Licensee hereby agrees to indemnify, defend and hold
harmless Scripps and any parent, subsidiary or other affiliated entity and their
trustees, officers, employees, scientists and agents from and against any
liability or expense arising from any product liability claim asserted by any
party as to any Licensed Product or any claims arising from the use of any
Scripps Patent Rights or Scripps Technology pursuant to this Agreement. Such
indemnity and defense obligation shall apply to any product liability or other
claims, including without limitation, personal injury, death or property damage,
made by employees, subcontractors, sublicensees, or agents of Licensee, as well
as any member of the general public. Notwithstanding the foregoing, Licensee's
obligation to provide indemnification under this Section 4.3 shall be subject to
each party seeking indemnification hereunder (i) promptly notify Licensee in
writing of any claim, suit or proceeding with respect to which the party intends
to claim such indemnification, (ii) give Licensee sole control of the defense
and/or settlement thereof, and (iii) provide Licensee, at Licensee's expense,
with reasonable assistance and full information with respect to such claim, suit
or proceeding. Licensee shall not settle any claim, suit or proceeding subject
to this Section 4.3 or otherwise consent to an adverse judgment in such claim,
suit or proceeding if the same materially diminishes the rights or interests of
the indemnified party without the express written consent of such party.
Licensee shall have no obligation for any claim, suit or proceeding if the party
seeking indemnification makes any settlement regarding such claim, suit or
proceeding without the prior written consent of Licensee, which consent shall
not be unreasonably withheld. Licensee shall use its best efforts to have
Scripps and any parent, subsidiary or other affiliated entity and their
trustees, officers, employees, scientists and agents named as additional insured
parties on any product liability insurance policies maintained by Licensee, its
Affiliates and sublicensees applicable to Licensed Products.

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

                                       12
<PAGE>

      4.5 No Use of Name. Except as required by law, the use of the name "The
Scripps Research Institute", " Scripps", or any variation thereof in connection
with the advertising or sale of Licensed Products is expressly prohibited.

      4.6 U.S. Manufacture. To the extent required by applicable United States
laws, if at all, Licensee agrees that Licensed Products will be manufactured in
the United States, or its territories, subject to such waivers as may be
required, or obtained, if at all, from the United States Department of Health
and Human Services, or its designee.

      4.7 Foreign Registration. Licensee agrees to register this Agreement with
any foreign governmental agency which requires such registration, and Licensee
shall pay all costs and legal fees in connection therewith. In addition,
Licensee shall assure that all foreign laws affecting this Agreement or the sale
of Licensed Products are fully satisfied.

5. Limited Warranty. Scripps hereby represents and warrants that subject to the
rights of the United States Government (i) it has sole right and power to enter
into this Agreement and grant the rights and licenses granted herein; (ii)
Scripps is and shall be the owner of the entire right, title, and interest in
and to the Scripps Patent Rights; (iii) Scripps has not previously granted and
will not grant any rights in the Scripps Patent Rights that are inconsistent
with the rights and licenses granted to Licensee herein; and (iv) to the best of
its knowledge, there are no claims of third parties that would call into
question the rights of Scripps to grant to Licensee the rights contemplated
hereunder. EXCEPT AS PROVIDED IN THIS SECTION 5, NEITHER PARTY MAKES ANY
WARRANTIES OR CONDITIONS (EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) WITH RESPECT
TO THE SUBJECT MATTER HEREOF. SPECIFICALLY, SCRIPPS MAKES NO OTHER WARRANTIES
CONCERNING SCRIPPS PATENT RIGHTS OR SCRIPPS TECHNOLOGY COVERED BY THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO SCRIPPS PATENT RIGHTS,
SCRIPPS TECHNOLOGY OR ANY LICENSED PRODUCT. SCRIPPS MAKES NO WARRANTY OR
REPRESENTATION AS TO THE VALIDITY OR SCOPE OF SCRIPPS PATENT RIGHTS, OR THAT ANY
LICENSED PRODUCT WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN
ANY WAY INFRINGING SCRIPPS PATENT RIGHTS OR SCRIPPS TECHNOLOGY COVERED BY THIS
AGREEMENT.

6. Interests in Intellectual Property Rights.

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

      6.2 Royalty-free License to Improvements. Licensee hereby grants to
Scripps a non-exclusive, royalty-free license to any improvement to Scripps
Technology developed by Licensee

                                       13
<PAGE>

during the term of this Agreement, to use for Scripps own non-commercial
research purposes or grant to other nonprofit institutions for their
non-commercial research purposes.

      6.3 Governmental Interest. Licensee and Scripps acknowledge that Scripps
has received, and expects to continue to receive, funding from the United States
Government in support of Scripps' research activities. Licensee and Scripps
acknowledge and agree that their respective rights and obligations pursuant to
this Agreement shall be subject to Scripps' obligations and the rights of the
United States Government, if any, which arise or result from Scripps' receipt of
research support from the United States Government, including without
limitation, the grant by Scripps to the United States a non-exclusive,
irrevocable, royalty-free license to Scripps Technology and Scripps Patent
Rights licensed hereunder for governmental purposes.

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

7. Confidentiality and Publication.

      7.1 Treatment of Confidential Information. The parties agree that during
the term of this Agreement and for ten ( 10) years thereafter, a party receiving
Confidential Information of the other party will (i) maintain in confidence such
Confidential Information to the same extent such party maintains its own
proprietary industrial information, (ii) not disclose such Confidential
Information to any third party without prior written consent of the other party
and (iii) not use such Confidential Information for any purpose except those
permitted by this Agreement.

      7.2 Permitted Usage. Notwithstanding the provisions of Section 7.1 above,
the receiving party may use or disclose Confidential Information of the
disclosing party to the extent necessary to exercise its rights hereunder
(including commercialization and/or sublicensing of Scripps Patent Rights and
Scripps Technology) or fulfill its obligations and/or duties hereunder and in
filing for, prosecuting or maintaining any proprietary rights, prosecuting or
defending litigation, complying with applicable governmental regulations and/or
submitting information to tax or other governmental authorities; provided that
if the receiving party is required by law to make any public disclosures of
Confidential Information of the disclosing party, to the extent it may legally
do so, it will give reasonable advance notice to the disclosing party of such
disclosure and will use its reasonable efforts to secure confidential treatment
of Confidential Information prior to its disclosure (whether through protective
orders or otherwise).

      7.3 Publications. Licensee agrees that Scripps shall have a right to
publish in accordance with its general policies and subject to Section 6.2 of
the Research Agreement.

      7.4 Publicity. Except as otherwise provided herein or required by law, no
party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, stockholders'
reports, or otherwise, relating to this Agreement or to any sublicense

                                       14
<PAGE>

hereunder, or to the performance hereunder or any such agreements, without the
prior written approval of the other party, which approval shall not be
unreasonably withheld. Scientific publications published in accordance with
Section 7.3 of this Agreement shall not be construed as publicity governed by
this Section 7.4.

8. Term and Termination.

      8.1 Term. Unless terminated sooner in accordance with the terms set forth
herein, this Agreement, and the license granted hereunder, shall terminate as
provided in Section 2.7 hereof.

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

      Such termination rights shall be in addition to and not in substitution
for any other remedies that may be available to the non-defaulting party.
Termination pursuant to this Section 8.2 shall not relieve the defaulting party
from liability and damages to the other party for breach of this Agreement.
Waiver by either party of a single default or a succession of defaults shall not
deprive such party of any right to terminate this Agreement arising by reason of
any subsequent default.

      Notwithstanding the foregoing provisions of this Section 8.2, if the party
alleged to be in default of this Agreement disputes in good faith such default
within the applicable cure period, the other party's right to terminate shall be
stayed until it has been determined in accordance with Section 10.2 below of
this Agreement that the party alleged to be in default was actually in default
and such defaulting party fails to comply with its obligations hereunder within
the applicable cure period.

      8.3 Termination Upon Bankruptcy or Insolvency. This Agreement may be
terminated by Scripps giving written notice of termination to Licensee upon the
filing of bankruptcy or bankruptcy of Licensee or the appointment of a receiver
of any of Licensee's assets, or the making by Licensee of any assignment for the
benefit of creditors, or the institution of any proceedings against Licensee
under any bankruptcy law which proceeding is not dismissed with prejudice within
ninety (90) days from its initiation. Termination shall be effective upon the
date specified in such notice.

      8.4 Termination by Licensee. Any provision herein notwithstanding,
Licensee may terminate this Agreement, in its entirety or as to any particular
patent or patent application within the Scripps Patent Rights, or as to any
particular Licensed Product, at any time by giving Scripps at least ninety (90)
days prior written notice. From and after the effective date of a termination
under this Section 8.4 with respect to a particular patent or application, such
patent(s) and patent

                                       15
<PAGE>

application(s) in the particular country shall cease to be within the Scripps
Patent Rights for all purposes of this Agreement, and all rights and obligations
of Licensee with respect to such patent(s) and patent application(s) shall
terminate. From and after the effective date of a termination under this Section
8.3 with respect to a particular Licensed Product, the license granted under
Section 2.1 above shall terminate with respect to such Licensed Product, and the
same shall cease to be a Licensed Product for all purposes of this Agreement.
Upon a termination of this Agreement in its entirety under this Section 8.4, all
rights and obligations of the parties shall terminate, except as provided in
Section 8.5 below.

      8.5 Rights Upon Expiration. Neither party shall have any further rights or
obligations upon the expiration of this Agreement upon its regularly scheduled
expiration date with respect to this Agreement, other than the obligation of
Licensee to make any and all reports and payments for the final quarter period.
Provided, however, that upon such expiration, each party shall be required to
continue to abide by its non-use and non-disclosure obligations as described in
Section 7.1, and Licensee shall continue to maintain records under Section 2.10
and abide by its obligation to indemnify Scripps as described in Section 4.3 and
by its obligations under Section 6.2 hereof.

      8.6 Rights Upon Termination.

            8.6.1 Accrued Obligations. Termination of this Agreement for any
reason shall not release either party hereto from any liability which at the
time of such termination has already accrued to the other party.

            8.6.2 Inventory. In the event this Agreement is terminated for any
reason, Licensee shall provide Scripps with a written inventory of all Licensed
Products that Licensee and its Affiliates have in process of manufacture, in use
or in stock and Licensee and its Affiliates shall have the right to sell or
otherwise dispose of such Licensed Products for a period not to exceed six (6)
months from the effective date of such termination, all subject to the payment
to Scripps royalties and provision of reports pursuant to this Agreement.

            8.6.3 Sublicenses. Upon termination of this Agreement by Scripps for
any reason, any sublicense granted by Licensee hereunder shall survive, provided
that upon request by Scripps, such Sublicensee promptly agrees in writing to be
bound by the applicable terms of this Agreement.

            8.6.4 Survival. Sections 2.10, 4.3, 6.2, 7.1 and 10 shall survive
any termination of this Agreement. Except as otherwise provided in this Section
8, all rights and obligations of the parties under this Agreement shall
terminate upon termination of this Agreement.

9. Assignment; Successors.

      9.1 Assignment. Neither this Agreement nor any rights granted hereunder
may be assigned or transferred by Licensee except (i) to an Affiliate of
Licensee or (ii) to a successor in interest to all or substantially all of the
business assets of Licensee, whether by way of a merger, consolidation, sale of
all or substantially all of Licensee's assets, change of control or similar
transaction, without the prior written consent of Scripps.

                                       16
<PAGE>

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

10. General Provisions.

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

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

            10.2.1 Location. The location of the arbitration shall be in the
County of San Diego in the State of California.

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

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

                                       17
<PAGE>

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

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

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

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

      10.3 Entire Agreement Modification. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof.
There shall be no amendments or modifications to this Agreement, except by a
written document which is signed by both parties. It is understood that the
Research Agreement is separate and independent from this Agreement and
termination of either agreement shall not operate to terminate or otherwise
effect the rights and obligations of the parties under the other agreement.

      10.4 California Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.

      10. 5 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL
DAMAGES (INCLUDING LOST OR ANTICIPATED

                                       18
<PAGE>

REVENUES OR PROFITS RELATING TO THE SAME), ARISING FROM ANY CLAIM RELATING TO
THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON CONTRACT, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE, EVEN IF AN AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS
ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

      10.6 No Implied Obligations. Licensee's sole obligation to exploit the
Scripps Patent Rights and Scripps Technology is as set forth in Section 4.1.
Nothing in this Agreement shall be deemed to require Licensee to otherwise
exploit the Scripps Patent Rights or Scripps Technology nor prevent Licensee
from commercializing products similar to or competitive with a Licensed Product.

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

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

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

      10.10 Name. Whenever there has been an assignment by Licensee as permitted
by this Agreement, the term "Licensee" as used in this Agreement shall also
include and refer to, if appropriate, such assignee.

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

      For Scripps       The Scripps Research Institute
                        10550 North Torrey Pines Road, TPC-9
                        La Jolla, California 92037
                        Attn: Director, Technology Development
                        Fax No.: (619) 784-9910

      For Licensee:     StemCells, Inc.

                                       19
<PAGE>

                        701 George Washington Highway
                        Lincoln, Rhode Island 02865
                        Attn: Research Director
                        Fax No.: (401) 333-0684

      with a copy to:   CytoTherapeutics, Inc.
                        701 George Washington Highway
                        Lincoln, Rhode Island 02865
                        Attn: General Counsel
                        Fax No.: (401) 334-9152

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

                                       20
<PAGE>

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

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

SCRIPPS:                                  LICENSEE:

THE SCRIPPS RESEARCH INSTITUTE            STEMCELLS, INC.

By: _______________________________       By: _______________________________

Name: _____________________________       Philip K. Yachmetz

Title: ____________________________       Senior Vice President

                                       21

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