Document:

<PAGE>

                                                                    EXHIBIT 10.1

                                FOURTH AMENDMENT

                                       TO

                      AMENDED AND RESTATED CREDIT AGREEMENT

                  Fourth Amendment, dated as of September 30, 2003 (this
"Amendment"), to the Amended and Restated Credit Agreement, dated as of January
14, 2003 (as amended to date, "Credit Agreement"), by and among KCS ENERGY,
INC., a Delaware corporation (the "Borrower"), the lenders from time to time
party thereto (each a "Lender" and collectively, the "Lenders"), WELLS FARGO
FOOTHILL, INC., a California corporation, formerly known as Foothill Capital
Corporation ("Foothill"), as collateral agent for the Lenders (in such capacity,
together with any successor collateral agent, the "Collateral Agent"), Foothill,
as administrative agent for the Lenders (in such capacity, together with any
successor administrative agent, the "Administrative Agent"; and together with
the Collateral Agent, each an "Agent" and collectively, the "Agents"), and
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P., a Delaware limited
partnership ("Highbridge"), as lead arranger.

         The Borrower and the Required Lenders desire to amend the Credit
Agreement as hereinafter set forth.

         Accordingly, the Borrower and the Required Lenders hereby agree as
follows:

                 1. Definitions in Amendment. Any capitalized term used herein
and not defined shall have the meaning assigned to it in the Credit Agreement.

                 2. Defined Terms. (a) The definition of "Applicable LIBOR
Margin" in Section 1.01 of the Credit Agreement is hereby amended and restated
to read in its entirety as follows:

         " 'Applicable LIBOR Margin' means, as to each LIBOR Rate Loan, the
applicable margin set forth in the right side of the grid below:

<Table>
<Caption>
A percentage equal to the average principal amount of Revolving A Loans
and Letter of Credit Obligations outstanding during any calendar month
over the Total Revolving A Credit Commitment                                   Applicable LIBOR Margin
-----------------------------------------------------------------------        -----------------------
<S>                                                                            <C>
Less than 50%                                                                   2.75 percentage points

Greater than or equal to 50%                                                    3.0 percentage points"
</Table>

<PAGE>

                 (b) The definition of "Applicable Reference Rate Margin" in
Section 1.01 of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:

         " 'Applicable Reference Rate Margin' means, as to each Reference Rate
Loan, the applicable margin set forth in the right side of the grid below:

<Table>
<Caption>
A percentage equal to the average principal amount of Revolving A Loans and
Letter of Credit Obligations outstanding during any calendar month
over the Total Revolving A Credit Commitment                                    Applicable Reference Rate Margin
---------------------------------------------------------------------------     --------------------------------
<S>                                                                             <C>
Less than 50%                                                                             0.50 percentage points

Greater than or equal to 50%                                                              0.75 percentage points"
</Table>

                 3. Reporting Requirements. Clause (vii) of Section 7.01(a) of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:

         "(vii) as soon as available and in any event within 30 days after the
end of each fiscal quarter of the Borrower ending after the Effective Date, a
report setting forth, in form reasonably acceptable to the Agents, the
calculation of the PV-10 of the Proved Reserves composing the Borrowing Base and
the Revolver A Borrowing Base as determined by the Reserve Report most recently
delivered by the Borrower under Section 7.01(a)(vi), such calculation to be made
by multiplying (x) the volumetric quantity of the categories of estimated Proved
Reserves set forth in such Reserve Report less such aggregate projected
production of Proved Reserves since the date of and as provided in such Reserve
Report by (y) the applicable NYMEX Strip Price as of the last Business Day of
the month preceding the date of the delivery by the Borrower of such report to
the Agents; each such report shall (A) also include a discussion of (I) any
material changes since the date of such Reserve Report in the categorization of
any Oil and Gas Properties among Proved Developed Producing Reserves, Proved
Developed Non-Producing Reserves, Proved Undeveloped Reserves and "other", (II)
any changes in the working interest or net revenue interest in the Oil and Gas
Properties of the Borrower and its Subsidiaries reflected on such Reserve
Report, (III) production delivered during such fiscal quarter and remaining
production to be delivered under the Production Payment 2001 Facility and the
Takeout VPP Facility, and (IV) such other information as the Agents shall
reasonably consider appropriate or necessary from the perspective of an
asset-based lender; and (B) be accompanied by a certificate of an Authorized
Officer of the Borrower certifying to the completeness and accuracy of the
report, including the calculation of the PV-10 of Proved Reserves comprising the
Borrowing Base and the Revolver A Borrowing Base; provided that the Required
Lenders in their sole discretion may require the Borrower to cause the report
required to be delivered pursuant to this clause (vii) to be delivered within 30
days after the end of each month, at the Borrower's expense, if (xx) the NYMEX
Strip Price on the last Business Day of any month is less than $19.80 per barrel
of oil or $3.89 per MmBTU of natural gas, (yy) Availability is less than (x)
$17,000,000 at any time during the period from October 1, 2003 through November
30, 2003, or (y) $18,700,000 at any time on and after December 1, 2003, or (zz)
an Event of Default has occurred and is continuing;"

<PAGE>

                 4. Negative Covenants. Section 7.02(g) of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:

         "(g) Capital Expenditures. (i) Make or commit or agree to make, or
permit any of its Subsidiaries to make or commit or agree to make, any Capital
Expenditure (by purchase or Capitalized Lease) that would cause the aggregate
amount of all Capital Expenditures made by the Loan Parties and their
Subsidiaries to exceed (A) $75,000,000 in the Borrower's Fiscal Year ending
December 31, 2003 (the "2003 CapEx Limit"); provided, however, that as of
December 1, 2003 the 2003 CapEx Limit may equal $80,000,000 so long as
Availability is not less than $20,000,000 at any time during the period from
December 1, 2003 through December 31, 2003, (B) $75,000,000 in the Borrower's
Fiscal Year ending December 31, 2004 and (C) $86,000,000 in any Fiscal Year
thereafter, or (ii) make aggregate Capital Expenditures during any fiscal
quarter of the Borrower that exceed an amount equal to 50% of the applicable
annual amount set forth in clause (i) above; provided that at any time that the
Borrower has Revolver A Availability of less than $5,000,000, Borrower shall be
prohibited from making any Capital Expenditure without the written approval of
the Administrative Agent."

                 5. Conditions Precedent.This Amendment shall become effective
only upon satisfaction in full of the following conditions precedent (the first
date upon which all such conditions have been satisfied being herein called the
"Amendment Effective Date"):

                 (a) The representations and warranties contained in Article VI
of the Credit Agreement and each other Loan Document shall be correct on and as
of the Amendment Effective Date as though made on and as of such date (except
where such representations and warranties relate to an earlier date in which
case such representations and warranties shall be true and correct as of such
earlier date); and no Event of Default shall have occurred and be continuing on
the Amendment Effective Date or result from this Amendment becoming effective in
accordance with its terms.

                 (b) The Administrative Agent shall have received counterparts
of this Amendment which bear the signatures of the Borrower and the Required
Lenders.

                 6. Continued Effectiveness of Credit Agreement. The Borrower
hereby (i) confirms and agrees that each Loan Document to which it is a party
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects except that on and after the date hereof all
references in any such Loan Document to "the Credit Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Credit
Agreement shall mean the Credit Agreement as amended by this Amendment, and (ii)
confirms and agrees that to the extent that any such Loan Document purports to
assign or pledge to the Collateral Agent, or to grant to the Collateral Agent a
security interest in or lien on, any collateral as security for the Obligations
of the Borrower from time to time existing in respect of the Credit Agreement
and the Loan Documents, such pledge, assignment and/or grant of the security
interest or lien is hereby ratified and confirmed in all respects.

<PAGE>

                 7. Miscellaneous.

                 (a) This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Amendment by telecopy shall be equally as effective as delivery of an
original executed counterpart of this Amendment.

                 (b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

                 (c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.

                               KCS ENERGY, INC.

                               By: /s/ J T Leary
                                   --------------------------------------------
                               Name: J.T. Leary
                               Title:  VP and CFO

                               WELLS FARGO FOOTHILL, INC.

                               By: /s/ Stacy Yucht
                                   --------------------------------------------
                               Name: Stacy Yucht
                               Title    Vice President

                               HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.

                               By:  Highbridge/Zwirn Capital Management, LLC

                               By: /s/ Daniel B. Zwen
                                   -------------------------------------------
                                   Name: Daniel B. Zwen
                                   Title:   Managing Principal

                               ABLECO FINANCE LLC

                               By: /s/ Kevin Genda
                                   -------------------------------------------
                                   Name:  Kevin Genda
                                   Title:    Sr. Vice President<PAGE>
                                                                    EXHIBIT 10.1

                              PUBLIC HEALTH SERVICE
                     PHS PATENT LICENSE AGREEMENT--EXCLUSIVE
                                   COVER PAGE

For PHS internal use only:

         Patent License Number: L-354-98/0, which relates to OTT Reference
         Number E-016-96/0.

         Serial Numbers of Patent Applications: 60/016,628, filed May 1, 1996,
         entitled "21-substituted Progesterone Derivatives as New
         Anti-Progestational Agents." Inventors for this application: Drs. Hyun
         K. Kim (NICHD), Richard P. Blye (NICHD) and Drs. Pemmaraju Narasinha
         Rao, James W. Cessac, and Carmie Kirk Acosta, all of Southwest
         Foundation for Biomedical Research (SFBR).

         LICENSEE: Zonagen, Inc., a Delaware corporation, having its principal
         office at 2408 Timberloch Place, Suite B-4, The Woodlands, Texas 77380.

         Cooperative Research and Development Agreement (CRADA) Number: None.

         Additional Remarks: The terms of this AGREEMENT shall be considered
         CONFIDENTIAL.

         Public Benefit(s): The principal benefit of this invention is its
         potential to treat diseases of hormonal or endocrine tissues.

This exclusive patent license agreement (hereinafter referred to as the
("AGREEMENT"), made effective the first date upon which all the Parties have
subscribed their signatures hereunto ("EFFECTIVE DATE"), consists of this Cover
Page, an attached AGREEMENT, a Signature Page, Appendix A (List of Patent(s)
and/or Patent Application(s)), Appendix B (LICENSED FIELDS-OF-USE and LICENSED
TERRITORY), Appendix C (Royalties), Appendix D (Modifications), Appendix E
(BENCHMARKS), and Appendix F (COMMERCIAL DEVELOPMENT PLAN). The Parties to this
AGREEMENT are:

         1)       The National Institutes of Health ("NIH"), the Centers for
                  Disease Control and Prevention ("CDC"), or the Food and Drug
                  Administration ("FDA"), hereinafter singly or collectively
                  referred to as ("PHS"), agencies of the United States Public
                  Health Service within the Department of Health and Human
                  Services ("DHHS"); and

         2)       The person, corporation, or institution identified above
                  and/or on the Signature Page, having offices at the address
                  indicated on the Signature Page (hereinafter referred to as
                  ("LICENSEE").

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 1 of 22

<PAGE>

                     PHS PATENT LICENSE AGREEMENT-EXCLUSIVE

PHS and LICENSEE agree as follows:

1.       BACKGROUND

         1.01     In the course of conducting biomedical and behavioral
                  research, PHS investigators and investigators at the Southwest
                  Foundation for Biomedical Research ("SFBR") made inventions
                  that may have commercial applicability.

         1.02     By assignment of rights from PHS employees, DHHS, on behalf of
                  the United States Government, owns intellectual property
                  rights claimed in any United States and/or foreign patent
                  applications or patents corresponding to the assigned
                  inventions. DHHS also owns any tangible embodiments of these
                  inventions actually reduced to practice by PHS.

         1.03     The Secretary of DHHS has delegated to PHS the authority to
                  enter into this AGREEMENT for the licensing of rights to these
                  inventions.

         1.04     PHS and SFBR, entered into an Inter-institutional Agreement
                  May 1, 1998 whereby SFBR granted PHS an exclusive license
                  including the right to grant sublicenses, under U.S. Patent
                  Application 60/016,628 and any divisions or continuations
                  thereof, all foreign counterpart applications, and any U.S.
                  and foreign patents issued thereon or reissues or extensions
                  thereof.

         1.05     PHS desires to transfer these inventions to the private sector
                  through commercialization licenses to facilitate the
                  commercial development of products and processes for public
                  use and benefit.

         1.06     LICENSEE has represented to PHS, to induce PHS to enter this
                  AGREEMENT, that LICENSEE has or shall acquire the necessary
                  research, development, manufacturing, distribution, marketing
                  and sales capabilities and expertise and will use its
                  reasonable best efforts to develop and commercialize LICENSED
                  PRODUCT(S) and LICENSED PROCESS(ES) in the LICENSED
                  FIELDS-OF-USE in the LICENSED TERRITORY for public use and
                  benefit.

2.       DEFINITIONS

         2.01     "BENCHMARKS" shall mean the performance milestones that are
                  set forth in Appendix E.

         2.02     "COMMERCIAL DEVELOPMENT PLAN" shall mean the written
                  commercialization plan attached as Appendix F.

         2.03     "FIRST COMMERCIAL SALE" shall mean the initial transfer by or
                  on behalf of LICENSEE, its AFFILIATES or its SUBLICENSEES of
                  LICENSED PRODUCTS or the initial practice of a LICENSED
                  PROCESS by or on behalf of LICENSEE, its AFFILIATES, or its
                  SUBLICENSEES in exchange for cash or some equivalent to which
                  value can be assigned for the purpose of determining NET
                  SALES.

         2.04     "GOVERNMENT" means the GOVERNMENT of the United States of
                  America.

         2.05     "LICENSED FIELDS-OF-USE" means the fields of use identified in
                  Appendix B.

         2.06     "LICENSED PATENT RIGHTS" shall mean:

                  a)       Patent applications (including provisional patent
                           applications and Patent Cooperation Treaty (PCT)
                           patent applications) and/or patents listed in
                           Appendix A, all divisions and continuations of these
                           applications, all patents issuing from such
                           applications, divisions, and continuations, and any
                           reissues, reexaminations, and extensions of all such
                           patents;

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 2 of 22

<PAGE>

                  b)       To the extent that the following contain one or more
                           claims directed to the invention or inventions
                           disclosed in a) above: i) continuations-in-part of a)
                           above; ii) all divisions and continuations of these
                           continuations-in-part; iii) all patents issuing from
                           such continuations-in-part, divisions, and
                           continuations; iv) priority patent application(s) of
                           a) above; and v) any reissues, reexaminations, and
                           extensions of all such patents;

                  c)       To the extent that the following contain one or more
                           claims directed to the invention or inventions
                           disclosed in a) above: all counterpart foreign and
                           U.S. patent applications and patents to a) and b)
                           above, including those listed in Appendix A.

                  LICENSED PATENT RIGHTS shall not include b) or c) above to the
                  extent that they contain one or more claims directed to new
                  matter which is not the subject matter disclosed in a) above.

         2.07     "LICENSED PROCESS(ES)" shall mean processes which, in the
                  course of being practiced would, in the absence of this
                  AGREEMENT, infringe one or more claims of the LICENSED PATENT
                  RIGHTS that have not been held invalid or unenforceable by an
                  unappealed or unappealable judgment of a court of competent
                  jurisdiction.

         2.08     "LICENSED PRODUCT(S)" shall mean tangible materials which, in
                  the course of manufacture, use, offer to sell, sale, or
                  importation would, in the absence of this AGREEMENT, infringe
                  one or more claims of the LICENSED PATENT RIGHTS that have not
                  been held invalid or unenforceable by an unappealed or
                  unappealable judgment of a court of competent jurisdiction.

         2.09     "LICENSED TERRITORY" shall mean the geographical area
                  identified in Appendix B.

         2.10     "NET SALES" for the purposes of computing the full royalty
                  contemplated under the provisions of Article 6 below, shall
                  mean the total gross receipts for sales of LICENSED PRODUCTS
                  or practice of LICENSED PROCESSES by or on behalf of LICENSEE,
                  its AFFILIATES and its SUBLICENSEES, and from leasing,
                  renting, or otherwise making LICENSED PRODUCTS available to
                  others without sale or other dispositions, whether invoiced or
                  not, less returns and allowances, packing costs, insurance
                  costs, freight out, taxes or excise duties imposed on the
                  transaction (if separately invoiced), and wholesaler and cash
                  discounts in amounts customary in the trade to the extent
                  actually granted. No deductions shall be made for commissions
                  paid to individuals, whether they shall be with independent
                  sales agencies or regularly employed by LICENSEE, its
                  AFFILIATES, or its SUBLICENSEES and on its payroll, or for the
                  cost of collections. It is the Parties' intention in all
                  transactions involving LICENSED PRODUCT(S) and/or LICENSED
                  PROCESS(ES), that PHS shall receive a royalty not less than
                  that which would have been generated in an arm's length
                  transaction.

         2.11     "AFFILIATES" shall mean any company or other legal entity,
                  other than LICENSEE, in whatever country organized, controlled
                  by, controlling, or under common control with LICENSEE. The
                  term "control" shall mean possession, direct or indirect, of
                  the powers to direct or cause the direction of the management
                  and policies of an entity, whether through the ownership of
                  voting securities, by contract, or otherwise, and the term
                  "entity" includes an individual, corporation or other entity.

         2.12     "PRACTICAL APPLICATION" shall mean to manufacture in the case
                  of a composition or product, to practice in the case of a
                  process or method, or to operate in the case of a machine or
                  system; and in each case, under such conditions as to
                  establish that the invention is being utilized and that its
                  benefits are to the extent permitted by law or GOVERNMENT
                  regulations available to the public on reasonable terms.

         2.13     "RESEARCH LICENSE" shall mean a nontransferable, nonexclusive
                  license to make and to use the LICENSED PRODUCTS or LICENSED
                  PROCESSES under the LICENSED PATENT RIGHTS for purposes of
                  research and not for purposes of commercial manufacture or
                  distribution or in lieu of purchase.

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April 5, 1999 - Final Page 3 of 22
<PAGE>

         2.14     "VALID CLAIM" shall mean the claim of a patent or pending
                  patent application which has not been held invalid or
                  otherwise unenforceable by a court of competent jurisdiction
                  from which no further appeal has or can be taken, or has not
                  otherwise finally been held unpatentable by the appropriate
                  administrative agency.

         2.15     "SUBLICENSEE" shall mean any third party who is not an
                  AFFILIATE and who is licensed by LICENSEE to manufacture or
                  sell any LICENSED PRODUCT.

3.       GRANT OF RIGHTS

         3.01     PHS hereby grants and LICENSEE accepts, subject to the terms
                  and conditions of this AGREEMENT, an exclusive license under
                  the LICENSED PATENT RIGHTS in the LICENSED TERRITORY to make
                  and have made, to use and have used, to sell and have sold, to
                  offer to sell, and to import any LICENSED PRODUCTS in the
                  LICENSED FIELDS-OF-USE and to practice and have practiced any
                  LICENSED PROCESSES in the LICENSED FIELDS-OF-USE.

         3.02     This AGREEMENT confers no license or rights by implication,
                  estoppel, or otherwise under any patent applications or
                  patents of PHS other than LICENSED PATENT RIGHTS regardless of
                  whether such patents are dominant or subordinate to LICENSED
                  PATENT RIGHTS. The Office of Technology Transfer is unaware of
                  any such patents.

4.       SUBLICENSING

         4.01     Upon written approval by PHS, which approval will not be
                  unreasonably withheld, LICENSEE may enter into sublicensing
                  agreements under the LICENSED PATENT RIGHTS.

         4.02     LICENSEE agrees that any sublicenses granted by it shall
                  provide that the obligations to PHS of Paragraphs 5.01-5.04,
                  8.01, 10.01, 10.02, 12.05, and 13.07-13.09 of this AGREEMENT
                  shall be binding upon the SUBLICENSEE as if it were a party to
                  this AGREEMENT. LICENSEE further agrees to attach copies of
                  these Paragraphs to all such sublicense agreements.

         4.03     Any sublicenses granted by LICENSEE shall provide for the
                  termination of the sublicense, or the conversion to a license
                  directly between such SUBLICENSEES and PHS, at the option of
                  the SUBLICENSEE, upon termination of this AGREEMENT under
                  Article 13. Such conversion is subject to PHS approval and
                  contingent upon acceptance by the SUBLICENSEE of the remaining
                  provisions of this AGREEMENT.

         4.04     LICENSEE shall forward to PHS a copy of each fully executed
                  sublicense agreement postmarked within thirty (30) days of the
                  execution of such agreement. To the extent permitted by law,
                  PHS agrees to maintain each such sublicense agreement in
                  confidence.

5.       STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS

         5.01     (a)      PHS reserves on behalf of the GOVERNMENT an
                           irrevocable, nonexclusive, nontransferable,
                           royalty-free license for the practice of all
                           inventions licensed under the LICENSED PATENT RIGHTS
                           throughout the world by or on behalf of the
                           GOVERNMENT and on behalf of any foreign government or
                           international organization pursuant to any existing
                           or future treaty or agreement to which the GOVERNMENT
                           is a signatory. Upon request by PHS, LICENSEE agrees
                           to provide PHS reasonable quantities of LICENSED
                           PRODUCTS or materials made through the LICENSED
                           PROCESSES for PHS research use.

                  (b)      In the event that LICENSED PATENT RIGHTS are Subject
                           Inventions made under a Cooperative Research and
                           Development Agreement ("CRADA"), LICENSEE grants to
                           the Government, pursuant to 15 U.S.C. 3710a(b)(1)(A),
                           a nonexclusive, nontransferable, irrevocable, paid-up
                           license to practice LICENSED PATENT RIGHTS or have
                           LICENSED PATENT

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 4 of 22
<PAGE>
                           RIGHTS practiced throughout the world by or on behalf
                           of the GOVERNMENT. In the exercise of such license,
                           the GOVERNMENT shall not publicly disclose trade
                           secrets or commercial or financial information that
                           is privileged or confidential within the meaning of 5
                           U.S.C. 552(b)(4) or which would be considered as such
                           if it had been obtained from a non-Federal party.
                           Prior to the FIRST COMMERCIAL SALE, LICENSEE agrees
                           to provide PHS reasonable quantities of LICENSED
                           PRODUCTS or materials made through the LICENSED
                           PROCESSES for PHS research use.

         5.02     LICENSEE agrees that products used or sold in the United
                  States embodying LICENSED PRODUCTS or produced through use of
                  LICENSED PROCESSES shall be manufactured substantially in the
                  United States, unless a written waiver is obtained in advance
                  from PHS. PHS does not represent that such a waiver shall be
                  granted.

         5.03     LICENSEE acknowledges that PHS may enter into future CRADAs
                  under the Federal Technology Transfer Act of 1986 that relate
                  to the subject matter of this AGREEMENT. LICENSEE shall not
                  unreasonably deny requests for a grant of a RESEARCH LICENSE
                  from such future collaborators with PHS when acquiring such
                  rights is necessary to make such a CRADA project feasible.
                  LICENSEE may request an opportunity to join as a party to the
                  proposed CRADA.

         5.04     (a)      In addition to the reserved license of Paragraph 5.01
                           above, PHS reserves the right to grant nonexclusive
                           RESEARCH LICENSEs directly or to require LICENSEE to
                           grant nonexclusive RESEARCH LICENSEs on reasonable
                           terms. The purpose of any such RESEARCH LICENSE shall
                           be to encourage basic research, whether conducted at
                           an academic or corporate facility. In order to
                           safeguard the LICENSED PATENT RIGHTS, however, PHS
                           shall consult with LICENSEE and reasonably consider
                           LICENSEE's views before making a decision to grant to
                           commercial entities a RESEARCH LICENSE or providing
                           to them research samples of materials made through
                           the LICENSED PROCESSES.

                  (b)      In exceptional circumstances, and in the event that
                           Licensed Patent Rights are Subject Inventions made
                           under a CRADA, the GOVERNMENT, pursuant to 15 U.S.C.
                           3710a(b)(1)(B), retains the right to require the
                           LICENSEE to grant to a responsible applicant a
                           nonexclusive, partially exclusive, or exclusive
                           sublicense to use LICENSED PATENT RIGHTS in
                           LICENSEE's field-of-use on terms that are reasonable
                           under the circumstances; or if LICENSEE fails to
                           grant such a license, the GOVERNMENT retains the
                           right to grant the license itself. The exercise of
                           such rights by the GOVERNMENT shall only be in
                           exceptional circumstances and only if the GOVERNMENT
                           determines (i) the action is necessary to meet health
                           or safety needs that are not reasonably satisfied by
                           LICENSEE; (ii) the action is necessary to meet
                           requirements for public use specified by Federal
                           regulations, and such requirements are not reasonably
                           satisfied by the LICENSEE; or (iii) the LICENSEE has
                           failed to comply with an agreement containing
                           provisions described in 15 U.S.C. 3710a(c)(4)(B). The
                           determination made by the GOVERNMENT under this
                           Article is subject to administrative appeal and
                           judicial review under 35 U.S.C. 203(2).

6.       ROYALTIES AND REIMBURSEMENT

         6.01     LICENSEE shall pay PHS a noncreditable, nonrefundable license
                  issue royalty as set forth in Appendix C.

         6.02     LICENSEE shall pay PHS noncreditable, nonrefundable patent
                  reimbursement royalty as set forth in Appendix C.

         6.03     LICENSEE shall pay PHS annual earned royalties as set forth in
                  Appendix C.

         6.04     LICENSEE shall pay PHS Benchmark royalties as set forth in
                  Appendix C.

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<PAGE>

         6.05     LICENSEE shall pay PHS sublicensing royalties as set forth in
                  Appendix C.

         6.06     For the purpose of capturing the full value of the license
                  granted herein and for ease of calculating royalties earned
                  and due PHS, LICENSEE agrees to pay adjusted annual earned
                  royalties on its NET SALES in countries in which a VALID CLAIM
                  does not exist. Adjusted royalties payable to PHS under such
                  circumstances are set forth in Appendix C.

         6.07     No multiple royalties shall be payable because any LICENSED
                  PRODUCTS or LICENSED PROCESSES are covered by more than one
                  patents or patent applications under the LICENSED PATENT
                  RIGHTS.

         6.08     On sales of LICENSED PRODUCTS by LICENSEE made in other than
                  an arm's-length transaction, the value of the NET SALES for
                  the purpose of calculating royalties owed and due under this
                  Article 6 shall be that which would have been received in an
                  arm's-length transaction, based on sales of like quantity and
                  quality products on or about the time of such transaction.

         6.09     PHS, at its sole option, may require LICENSEE to pay patent
                  expenses directly to the law firm employed by PHS to file,
                  prosecute and maintain patents and patent applications under
                  the LICENSED PATENT RIGHTS. In such an event, PHS and not
                  LICENSEE shall be the client of such law firm.

         6.10     In limited circumstances, LICENSEE may be given the right to
                  assume responsibility for the preparation, filing,
                  prosecution, or maintenance of any patent application or
                  patent included with the LICENSED PATENT RIGHTS. In that
                  event, LICENSEE shall directly pay the attorneys or agents
                  engaged to prepare, file, prosecute, or maintain such patent
                  applications or patents and shall provide to PHS copies of
                  each invoice associated with such services as well as
                  documentation that such invoices have been paid.

         6.11     LICENSEE, as provided for under Paragraph 13.04, may elect to
                  terminate this AGREEMENT or its license rights in any country
                  in the LICENSED TERRITORY. In such an event, on a country by
                  country basis, LICENSEE shall have no obligation to pay PHS a
                  patent reimbursement royalty or patent expenses incurred by
                  PHS after expiration of the sixty (60) day written notice
                  period required under Paragraph 13.04.

7.       PATENT FILING, PROSECUTION, AND MAINTENANCE

         7.01     Except as otherwise provided in this Article 7, PHS agrees to
                  take responsibility for, but to consult with, the LICENSEE in
                  the preparation, filing, prosecution, and maintenance of any
                  and all patent applications or patents included in the
                  LICENSED PATENT RIGHTS and shall furnish copies of relevant
                  patent-related documents to LICENSEE.

         7.02     Upon PHS's written request, LICENSEE shall assume the
                  responsibility for the preparation, filing, prosecution, and
                  maintenance of any and all patent applications or patents
                  included in the LICENSED PATENT RIGHTS and shall on an ongoing
                  basis promptly furnish copies of all patent-related documents
                  to PHS. In such event, LICENSEE shall, subject to the prior
                  approval of PHS, select registered patent attorneys or patent
                  agents to provide such services on behalf of LICENSEE and PHS.
                  PHS shall provide appropriate powers of attorney and other
                  documents necessary to undertake such actions to the patent
                  attorneys or patent agents providing such services. LICENSEE
                  and its attorneys or agents shall consult with PHS in all
                  aspects of the preparation, filing, prosecution and
                  maintenance of patent applications and patents included within
                  the LICENSED PATENT RIGHTS and shall provide PHS sufficient
                  opportunity to comment on any document that LICENSEE intends
                  to file or to cause to be filed with the relevant intellectual
                  property or patent office.

         7.03     At any time, PHS may provide LICENSEE with written notice that
                  PHS wishes to assume control of the preparation, filing,
                  prosecution, and maintenance of any and all patent
                  applications or patents

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<PAGE>

                  included in the LICENSED PATENT RIGHTS. If PHS elects to
                  assume such responsibilities, LICENSEE shall cooperate fully
                  with PHS, its attorneys, and agents in the preparation,
                  filing, prosecution, and maintenance of any and all patent
                  applications or patents included in the LICENSED PATENT RIGHTS
                  and provide PHS with complete copies of any and all documents
                  or other materials that PHS deems necessary to undertake such
                  responsibilities. LICENSEE shall be responsible for all costs
                  associated with transferring patent prosecution
                  responsibilities to an attorney or agent of PHS's choice.

         7.04     Each Party shall promptly inform the other as to all matters
                  that come to its attention that may affect the preparation,
                  filing, prosecution, or maintenance of the LICENSED PATENT
                  RIGHTS and permit each other to provide comments and
                  suggestions with respect to the preparation, filing,
                  prosecution, and maintenance of LICENSED PATENT RIGHTS, which
                  comments and suggestions shall be considered by the other
                  Party.

8.       RECORD KEEPING

         8.01     LICENSEE shall keep full, true and accurate books of accounts
                  and records, including work papers, containing particulars
                  that may be necessary for the purposes of showing the amounts
                  payable to PHS hereunder. Such books of account and records,
                  including working papers, shall be kept at LICENSEE's
                  principal place of business of the appropriate division of
                  LICENSEE to which this AGREEMENT relates, for a period of at
                  least five (5) years following the calendar year to which they
                  pertain, to the inspection of PHS or its agents, during normal
                  working hours, for the purpose of verifying the accuracy and
                  completeness of LICENSEE's royalty statement and/or compliance
                  in other aspects with this AGREEMENT. The full cost of any
                  such audit shall be borne by LICENSEE in the event that the
                  sum of royalties, fees and any other amounts actually reported
                  by LICENSEE for any twelve (12) month period are underreported
                  by more than five percent (5 % ) of the sum of royalties, fees
                  and other amounts determined payable by such audit. LICENSEE
                  shall pay the full cost of any such audit and all
                  underreported and/or unpaid amounts earned and due discovered
                  by such audit, including any late charges as required by
                  Paragraph 9.08 hereinbelow, within thirty (30) days of the
                  date PHS provides LICENSEE with written notice of the amounts
                  earned and due. PHS auditors or its designated independent
                  auditors shall only disclose to PHS information relating to
                  the accuracy of reports and underreporting and/or underpayment
                  of royalties, fees and any other amounts earned and due under
                  this AGREEMENT. PHS agrees to provide LICENSEE with at least
                  ten (10) days notice of an audit under this Paragraph 8.01.
                  PHS or its agents shall audit LICENSEE no more often than once
                  in any twelve month period.

         8.02     LICENSEE shall instruct its independent auditors to conduct an
                  annual royalty audit each calendar year for the term of this
                  AGREEMENT and to report their findings to PHS within thirty
                  (30) days of completing each such annual royalty audit. This
                  annual royalty audit shall include, on a country by country,
                  LICENSED PRODUCT by LICENSED PRODUCT basis, gross sales,
                  adjustments made to gross sales figures to determine NET
                  SALES, NET SALES, calculations applied to NET SALES figures to
                  determine earned royalties due PHS, earned royalties owed and
                  due PHS, and any other royalties earned and due PHS under this
                  AGREEMENT for the period audited. Such audit shall also
                  include a listing of gross sales, NET SALES and royalties
                  attributed to LICENSEE, each Affiliate and each SUBLICENSEE,
                  individually.

9.       REPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMENTS

         9.01     Prior to signing this AGREEMENT, LICENSEE has provided to PHS
                  the COMMERCIAL DEVELOPMENT PLAN at Appendix F, under which
                  LICENSEE intends to bring the subject matter of the LICENSED
                  PATENT RIGHTS to the point of PRACTICAL APPLICATION. This
                  COMMERCIAL DEVELOPMENT PLAN is hereby incorporated by
                  reference into this AGREEMENT. Based on this plan, performance
                  BENCHMARKS are determined as specified in Appendix E.

         9.02     LICENSEE shall provide written annual reports on its product
                  development progress or efforts to commercialize under the
                  COMMERCIAL DEVELOPMENT PLAN for each of the LICENSED
                  FIELDS-OF-USE

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                  within sixty (60) days after December 31 of each calendar
                  year. These progress reports shall include, but not be limited
                  to: progress on research and development, status of
                  applications for regulatory approvals, manufacturing,
                  sublicensing, marketing, importing, and sales during the
                  preceding calendar year, as well as plans for the present
                  calendar year. PHS also encourages these reports to include
                  information on any of LICENSEE's public service activities
                  that relate to the LICENSED PATENT RIGHTS. If reported
                  progress differs from that projected in the COMMERCIAL
                  DEVELOPMENT PLAN and BENCHMARKS, LICENSEE shall explain the
                  reasons for such differences. In any such annual report,
                  LICENSEE may propose amendments to the COMMERCIAL DEVELOPMENT
                  PLAN, acceptance of which by PHS may not be denied
                  unreasonably. LICENSEE agrees to provide any additional
                  information reasonably required by PHS to evaluate LICENSEE's
                  performance under this AGREEMENT. LICENSEE may amend the
                  BENCHMARKS at any time upon written consent by PHS. PHS shall
                  not unreasonably withhold approval of any request of LICENSEE
                  to extend the time periods of this schedule if such request is
                  supported by a reasonable showing by LICENSEE of diligence in
                  its performance under the COMMERCIAL DEVELOPMENT PLAN and
                  toward bringing the LICENSED PRODUCTS to the point of
                  PRACTICAL APPLICATION as defined in 37 CFR 404.3(d). LICENSEE
                  shall amend the COMMERCIAL DEVELOPMENT PLAN and BENCHMARKS at
                  the request of PHS to address any LICENSED FIELDS-OF-USE not
                  specifically addressed in the plan originally submitted.

         9.03     LICENSEE shall report to PHS the dates for achieving
                  BENCHMARKS specified in Appendix E and the FIRST COMMERCIAL
                  SALE in each country in the LICENSED TERRITORY within sixty
                  (60) days of such occurrences.

         9.04     LICENSEE shall submit to PHS within sixty (60) days after each
                  calendar half-year ending June 30 and December 31 a royalty
                  report setting forth for the preceding half-year period the
                  amount of the LICENSED PRODUCTS sold or LICENSED PROCESSES
                  practiced by or on behalf of LICENSEE in each country within
                  the LICENSED TERRITORY, the NET SALES, and the amount of
                  royalty accordingly due. With each such royalty report,
                  LICENSEE shall submit payment of the earned royalties due. If
                  no earned royalties are due to PHS for any reporting period,
                  the written report shall so state. The royalty report shall be
                  certified as correct by an authorized officer of LICENSEE and
                  shall include a detailed listing of all deductions made under
                  Paragraph 2.10 to determine NET SALES and the calculation of
                  royalties due under Article 6. Notwithstanding the above, the
                  first such royalty report shall be due the first calendar half
                  year period LICENSED PRODUCT(S) are sold by LICENSEE,
                  AFFILIATES, or SUBLICENSEES.

         9.05     LICENSEE agrees to forward semi-annually to PHS a copy of such
                  reports received by LICENSEE from its SUBLICENSEES during the
                  preceding half-year period as shall be pertinent to a royalty
                  accounting to PHS by LICENSEE for activities under the
                  sublicense.

         9.06     Royalties due under Article 6 shall be paid in U.S. dollars.
                  For the purposes of calculating the conversion of foreign
                  currency to U.S. dollars, the conversion rate to be used for
                  such calculation shall be the New York foreign exchange rate
                  quoted in The Wall Street Journal (U.S. Edition) on the last
                  day of each calendar half-year reporting period ending on June
                  30 and December 31, respectively. All checks and bank drafts
                  shall be drawn on United States banks and shall be payable, as
                  appropriate, to "NIH/Patent Licensing." All such payments
                  shall be sent to the following address: NIH, P.O. Box 360120,
                  Pittsburgh, PA 15251-6120. Any loss of exchange, value, taxes,
                  or other expenses incurred in the transfer or conversion to
                  U.S. dollars shall be paid entirely by LICENSEE. The royalty
                  report required by Paragraph 9.04 of this AGREEMENT shall
                  accompany each such payment, and a copy of such report shall
                  also be mailed to PHS at its address for notices indicated on
                  the Signature Page of this AGREEMENT.

         9.07     LICENSEE shall be solely responsible for determining if any
                  tax on royalty income is owed outside the United States and
                  shall pay any such tax and be responsible for all filings with
                  appropriate agencies of foreign governments.

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         9.08     Interest and penalties may be assessed by PHS on any overdue
                  payments in accordance with the Federal Debt Collection Act.
                  The payment of such late charges shall not prevent PHS from
                  exercising any other rights it may have as a consequence of
                  the lateness of any payment.

         9.09     All plans and reports required by this Article 9 and marked
                  "confidential" by LICENSEE shall, to the extent permitted by
                  law, be treated by PHS as commercial and financial information
                  obtained from a person and as privileged and confidential, and
                  any proposed disclosure of such records by PHS under the
                  Freedom of Information Act (FOIA), 5 U.S.C. Section 552 shall
                  be subject to the pre-disclosure notification requirements of
                  45 CFR Section 5.65(d).

10.      PERFORMANCE

         10.01    LICENSEE shall use its reasonable best efforts to bring the
                  LICENSED PRODUCTS and LICENSED PROCESSES to PRACTICAL
                  APPLICATION. "Reasonable best efforts" for the purposes of
                  this provision shall include adherence to the COMMERCIAL
                  DEVELOPMENT PLAN at Appendix F and performance of the
                  BENCHMARKS at Appendix E. The efforts of a SUBLICENSEE shall
                  be considered the efforts of LICENSEE.

         10.02    Upon the FIRST COMMERCIAL SALE, until the expiration or
                  earlier termination of this AGREEMENT, LICENSEE shall use its
                  reasonable best efforts to make LICENSED PRODUCTS and LICENSED
                  PROCESSES reasonably accessible to the United States public.

11.      INFRINGEMENT AND PATENT ENFORCEMENT

         11.01    PHS and LICENSEE shall notify each other promptly of each
                  infringement or possible infringement of the LICENSED PATENT
                  RIGHTS, as well as any facts which may affect the validity,
                  scope, or enforceability of the LICENSED PATENT RIGHTS of
                  which either Party becomes aware.

         11.02    Pursuant to this AGREEMENT and the provisions of Chapter 29 of
                  title 35, United States Code, LICENSEE may: a) bring suit in
                  its own name, at its own expense, and on its own behalf for
                  infringement of presumably valid claims in the LICENSED PATENT
                  RIGHTS; b) in any such suit, enjoin infringement and collect
                  for its use, damages, profits, and awards of whatever nature
                  recoverable for such infringement; and c) settle any claim or
                  suit for infringement of the LICENSED PATENT RIGHTS provided,
                  however, that PHS and appropriate GOVERNMENT authorities shall
                  have the first right to take such actions at its sole expense.
                  If LICENSEE desires to initiate a suit for patent
                  infringement, LICENSEE shall notify PHS in writing. If PHS
                  does not notify LICENSEE of its intent to pursue legal action
                  within sixty (60) days, LICENSEE will be free to initiate
                  suit. PHS shall have a continuing right to intervene in such
                  suit. LICENSEE shall take no action to compel the GOVERNMENT
                  either to initiate or to join in any such suit for patent
                  infringement. LICENSEE may request the GOVERNMENT to initiate
                  or join in any such suit if necessary to avoid dismissal of
                  the suit. Should the GOVERNMENT be made a party to any such
                  suit, LICENSEE shall reimburse the GOVERNMENT for any costs,
                  expenses, or fees which the GOVERNMENT incurs as a result of
                  such motion or other action, including any and all costs
                  incurred by the GOVERNMENT in opposing any such motion or
                  other action. In all cases, LICENSEE shall keep PHS apprised
                  of the status and progress of any litigation. Before LICENSEE
                  commences an infringement action, LICENSEE shall notify PHS
                  and give careful consideration to the views of PHS and to any
                  potential effects of the litigation on the public health in
                  deciding whether to bring suit.

         11.03    In the event that a declaratory judgment action alleging
                  invalidity or non-infringement of any of the LICENSED PATENT
                  RIGHTS shall be brought against LICENSEE or raised by way of
                  counterclaim or affirmative defense in an infringement suit
                  brought by LICENSEE under Paragraph 11.02, pursuant to this
                  AGREEMENT and the provisions of Chapter 29 of Title 35, United
                  States Code or other statutes, LICENSEE may: a) defend the
                  suit in its own name, at its own expense, and on its own
                  behalf for presumably valid claims in the LICENSED PATENT
                  RIGHTS; b) in any such suit, ultimately to enjoin infringement
                  and to collect for its use, damages, profits, and awards of
                  whatever nature recoverable for such infringement; and c)
                  settle any claim or suit for declaratory judgment

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<PAGE>

                  involving the LICENSED PATENT RIGHTS; provided, however, that
                  PHS and appropriate GOVERNMENT authorities shall have the
                  first right to take such actions and shall have a continuing
                  right to intervene in such suit. If PHS does not notify
                  LICENSEE of its intent to respond to the legal action within
                  sixty (60) days, LICENSEE will be free to do so. LICENSEE
                  shall take no action to compel the GOVERNMENT either to
                  initiate or to join in any such declaratory judgment action.
                  LICENSEE may request the GOVERNMENT to initiate or to join any
                  such suit if necessary to avoid dismissal of the suit. Should
                  the GOVERNMENT be made a party to any such suit by motion or
                  any other action of LICENSEE, LICENSEE shall reimburse the
                  GOVERNMENT for any costs, expenses, or fees which the
                  GOVERNMENT incurs as a result of such motion or other action.
                  If LICENSEE elects not to defend against such declaratory
                  judgment action, PHS, at its option, may do so at its own
                  expense. In all cases, LICENSEE shall keep PHS reasonably
                  apprised of the status and progress of any litigation. Before
                  LICENSEE commences an infringement action, LICENSEE shall
                  notify PHS and give careful consideration to the views of PHS
                  and to any potential effects of the litigation on the public
                  health in deciding whether to bring suit.

         11.04    In any action under Paragraphs 11.02 or 11.03, the expenses
                  including costs, fees, attorney fees, and disbursements, shall
                  be paid by LICENSEE. Up to fifty percent (50%) of such
                  expenses may be credited against earned royalties payable to
                  PHS under Paragraph 6.03 under the LICENSED PATENT RIGHTS in
                  the country in which such a suit is filed. In the event that
                  fifty (50%) of such expenses exceed the amount of earned
                  royalties payable by LICENSEE in any calendar year in such
                  country, the expenses in excess may be carried over as a
                  credit on the same basis into succeeding calendar years. Such
                  a credit against litigation expenses, however, shall not apply
                  to royalties other than earned royalties for the country in
                  which a suit is brought. Any recovery made by LICENSEE,
                  through a court judgement or settlement, first shall be
                  applied to reimburse PHS for royalties withheld as a credit
                  against litigation expenses and then to reimburse LICENSEE for
                  its litigation expense. Any remaining amount shall be treated
                  as NET SALES and earned royalties on such amounts shall be
                  calculated based on the royalty rate that would have applied
                  to NET SALES in the year in which such loss occurred.

         11.05    PHS shall cooperate fully with LICENSEE in connection with any
                  action under Paragraphs 11.02 or 11.03. PHS agrees promptly to
                  provide access to all necessary documents and to render
                  reasonable assistance in response to a request by LICENSEE.

12.      NEGATION OF WARRANTIES AND INDEMNIFICATION

         12.01    PHS offers no warranties other than those specified in Article
                  1.

         12.02    PHS does not warrant the validity of any patents or patent
                  application under the LICENSED PATENT RIGHTS and makes no
                  representations whatsoever with regard to the scope of the
                  LICENSED PATENT RIGHTS, or that the LICENSED PATENT RIGHTS may
                  be exploited without infringing other patents or other
                  intellectual property rights of third parties.

         12.03    PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF
                  MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY
                  SUBJECT MATTER DEFINED BY THE CLAIMS OF THE LICENSED PATENT
                  RIGHTS OR TANGIBLE MATERIALS RELATED THERETO.

         12.04    PHS does not represent that it will commence legal actions
                  against third parties infringing the LICENSED PATENT RIGHTS.

         12.05    LICENSEE shall indemnify and hold PHS, its employees,
                  students, fellows, agents, and consultants harmless from and
                  against all liability, demands, damages, expenses, and losses,
                  including but not limited to death, personal injury, illness,
                  or property damage in connection with or arising out of: a)
                  the use by or on behalf of LICENSEE, its AFFILIATES, its
                  SUBLICENSEES, directors, employees, or third parties of any
                  LICENSED PATENT RIGHTS; or b) the design, manufacture,
                  distribution, or use of any LICENSED PRODUCTS, LICENSED
                  PROCESSES or materials by LICENSEE, or other products or

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<PAGE>

                  processes developed in connection with or arising out of the
                  LICENSED PATENT RIGHTS. LICENSEE agrees to maintain a
                  liability insurance program consistent with sound business
                  practice.

13.      TERM, TERMINATION, AND MODIFICATION OF RIGHTS

         13.01    This AGREEMENT shall begin on the EFFECTIVE DATE and shall
                  extend to the expiration of the last to expire of the LICENSED
                  PATENT RIGHTS unless sooner terminated as provided in this
                  Article 13.

         13.02    In the event that LICENSEE is in default in the performance of
                  any material obligations under this AGREEMENT, including but
                  not limited to the obligations listed in Paragraph 13.05, and
                  if the default has not been remedied within ninety (90) days
                  after the date of notice in writing of such default, PHS may
                  terminate this AGREEMENT by written notice and pursue
                  outstanding amounts owed through procedures provided by the
                  Federal Debt Collection Act.

         13.03    In the event that LICENSEE becomes insolvent, files a petition
                  in bankruptcy, has such a petition filed against it,
                  determines to file a petition in bankruptcy, or receives
                  notice of a third party's intention to file an involuntary
                  petition in bankruptcy, LICENSEE shall immediately notify PHS
                  in writing. Furthermore, PHS shall have the right to terminate
                  this AGREEMENT immediately upon LICENSEE's receipt of written
                  notice.

         13.04    LICENSEE shall have a unilateral right to terminate this
                  AGREEMENT and/or any licenses in any country or territory by
                  giving PHS sixty (60) days written notice to that effect.

         13.05    PHS shall specifically have the right to terminate or modify,
                  at its option, this AGREEMENT, if PHS determines that the
                  LICENSEE: 1) is not executing the COMMERCIAL DEVELOPMENT PLAN
                  submitted with its request for a license and the LICENSEE
                  cannot otherwise demonstrate or reasonably justify to PHS's
                  satisfaction that the LICENSEE has taken, or can be expected
                  to take within a reasonable time, effective steps to achieve
                  PRACTICAL APPLICATION of the LICENSED PRODUCTS or LICENSED
                  PROCESSES; 2) has not achieved the BENCHMARKS as may be
                  modified under Paragraph 9.02; 3) has willfully made a false
                  statement of, or willfully omitted, a material fact in the
                  license application or in any report required by the license
                  AGREEMENT; 4) has committed a material breach of a covenant or
                  agreement contained in the license; 5) is not keeping LICENSED
                  PRODUCTS or LICENSED PROCESSES reasonably available to the
                  public after commercial use commences; 6) cannot reasonably
                  satisfy unmet health and safety needs; or 7) cannot reasonably
                  justify a failure to comply with the domestic production
                  requirement of Paragraph 5.02 unless waived. In making this
                  determination, PHS will take into account the normal course of
                  such commercial development programs conducted with sound and
                  reasonable business practices and judgment and the annual
                  reports submitted by LICENSEE under Paragraph 9.02. Prior to
                  invoking this right, PHS shall give written notice to LICENSEE
                  providing LICENSEE specific notice of, and a ninety (90) day
                  opportunity to respond to, PHS's concerns as to the previous
                  items 1) to 7). If LICENSEE fails to alleviate PHS's concerns
                  as to the previous items 1) to 7) or fails to initiate
                  corrective action to PHS's satisfaction, PHS may terminate
                  this AGREEMENT.

         13.06    When the public health and safety so require, and after
                  written notice to LICENSEE providing LICENSEE a sixty (60) day
                  opportunity to respond, PHS shall have the right to require
                  LICENSEE to grant sublicenses to responsible applicants, on
                  reasonable terms, in any LICENSED FIELDS-OF-USE under the
                  LICENSED PATENT RIGHTS, unless LICENSEE can reasonably
                  demonstrate that the granting of the sublicense would not
                  materially increase the availability to the public of the
                  subject matter of the LICENSED PATENT RIGHTS. PHS will not
                  require the granting of a sublicense unless the responsible
                  applicant has first negotiated in good faith with LICENSEE.

         13.07    PHS reserves the right according to 35 U.S. C. Section
                  209(f)(4) to terminate or modify this AGREEMENT if it is
                  determined that such action is necessary to meet requirements
                  for public use specified by federal regulations issued after
                  the EFFECTIVE DATE of this AGREEMENT and such requirements are
                  not reasonably satisfied by LICENSEE.

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         13.08    Within thirty (30) days of receipt of written notice of PHS's
                  unilateral decision to modify or terminate this AGREEMENT,
                  LICENSEE may, consistent with the provisions of 37 CFR 404.11,
                  appeal the decision by written submission to the designated
                  PHS official. The decision of the designated PHS official
                  shall be the final agency decision. LICENSEE may thereafter
                  exercise any and all administrative or judicial remedies that
                  may be available.

         13.09    Within ninety (90) days of expiration or termination of this
                  AGREEMENT under this Article 13, LICENSEE shall submit a final
                  report. Any royalty payments, including those incurred but not
                  yet paid, and those related to patent expense, due to PHS
                  shall become immediately due and payable upon termination or
                  expiration. If terminated under this Article 13, SUBLICENSEES
                  may elect to convert their sublicenses to direct licenses with
                  PHS pursuant to Paragraph 4.03. Unless otherwise specifically
                  provided for under this AGREEMENT, upon termination or
                  expiration of this AGREEMENT, LICENSEE shall return all
                  LICENSED PRODUCTS or other materials included within the
                  LICENSED PATENT RIGHTS to PHS or provide PHS with
                  certification of their destruction thereof.

14.      GENERAL PROVISIONS

         14.01    Neither Party may waive or release any of its rights or
                  interests in this AGREEMENT except in writing. The failure of
                  either Party to assert a right hereunder or to insist upon
                  compliance with any term or condition of this AGREEMENT shall
                  not constitute a waiver of that right or excuse a similar
                  failure to perform any such term or condition by the other
                  Party.

         14.02    This AGREEMENT constitutes the entire and only agreement and
                  understanding between the Parties relating to the subject
                  matter of this AGREEMENT, and all prior negotiations,
                  representations, promises, agreements, and understandings,
                  whether written or oral, are merged into, extinguished by, and
                  completely expressed by this AGREEMENT.

         14.03    The provisions of this AGREEMENT are severable, and in the
                  event that any provision of this AGREEMENT shall be determined
                  to be invalid or unenforceable under any controlling body of
                  law, such determination shall not in any way affect the
                  validity or enforceability of the remaining provisions of this
                  AGREEMENT.

         14.04    If either Party desires a modification to this AGREEMENT, the
                  Parties shall, upon reasonable notice of the proposed
                  modification by the Party desiring the change, confer in good
                  faith to determine the desirability of such modification. No
                  modification shall be effective until a written amendment is
                  signed by the signatories to this AGREEMENT or their
                  designees.

         14.05    The construction, validity, performance, and effect of this
                  AGREEMENT shall be governed by Federal law as applied by the
                  Federal courts in the District of Columbia.

         14.06    All notices required or permitted by this AGREEMENT shall be
                  given by prepaid, first class, registered or certified mail or
                  by an express/overnight delivery service provided by a
                  commercial carrier, properly addressed to the other Party at
                  the address designated on the following Signature Page, or to
                  such other address as may be designated in writing by such
                  other Party. Notices shall be considered timely if such
                  notices are received on or before the established deadline
                  date or sent on or before the deadline date as verifiable by
                  U.S. Postal Service postmark or dated receipt from a
                  commercial carrier. Parties should request a legibly dated
                  U.S. Postal Service postmark or obtain a dated receipt from a
                  commercial carrier or the U.S. Postal Service. Private metered
                  postmarks shall not be acceptable as proof of timely mailing.

         14.07    This AGREEMENT shall not be assigned by LICENSEE except: a)
                  with the prior written consent of PHS, such consent not to be
                  withheld unreasonably; or b) as part of a sale or transfer of
                  substantially the entire business of LICENSEE relating to
                  operations which concern this AGREEMENT. LICENSEE shall notify
                  PHS within ten (10) days of any assignment of this AGREEMENT
                  by LICENSEE.

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         14.08    LICENSEE shall in its use of any PHS-supplied materials comply
                  with all applicable statutes, regulations, and guidelines,
                  including PHS and DHHS regulations and guidelines. LICENSEE
                  agrees not to use the materials for research involving human
                  subjects or clinical trials in the United States without
                  complying with 21 CFR Part 50 and 45 CFR Part 46. LICENSEE
                  agrees not to use the materials for research involving human
                  subjects or clinical trials outside of the United States
                  without notifying PHS, in writing, of such research or trials
                  and complying with the applicable regulations of the
                  appropriate national control authorities. Written notification
                  to PHS of research involving human subjects or clinical trials
                  outside of the United States shall be given no later than
                  sixty (60) days prior to commencement of such research or
                  trials.

         14.09    LICENSEE acknowledges that it is subject to and agrees to
                  abide by the United States laws and regulations (including the
                  Export Administration Act of 1979 and Arms Export Control Act)
                  controlling the export of technical data, computer software,
                  laboratory prototypes, biological material, and other
                  commodities. The transfer of such items may require a license
                  from the cognizant Agency of the GOVERNMENT or written
                  assurances by LICENSEE that it shall not export such items to
                  certain foreign countries without prior approval of such
                  agency. PHS neither represents that a license is or is not
                  required or that, if required, it shall be issued.

         14.10    LICENSEE shall mark the LICENSED PRODUCTS or their packaging
                  sold in the United States with all applicable U.S. patent
                  numbers and similarly to indicate "Patent Pending" status in
                  such a fashion to preserve PHS's patent rights. All LICENSED
                  PRODUCTS manufactured in, shipped to, or sold in other
                  countries shall be marked in such a manner as to preserve
                  PHS's patent rights in each such country.

         14.11    By entering into this AGREEMENT, PHS does not directly or
                  indirectly endorse any product or service provided, or to be
                  provided, by LICENSEE whether directly or indirectly related
                  to this AGREEMENT. LICENSEE shall not state or imply that this
                  AGREEMENT is an endorsement by the GOVERNMENT, PHS, any other
                  GOVERNMENT organizational unit, or any GOVERNMENT employee.
                  Additionally, LICENSEE shall not use the names of NIH, CDC,
                  PHS, or DHHS or the GOVERNMENT or their employees in any
                  advertising, promotional, or sales literature without the
                  prior written consent of PHS.

         14.12    The Parties agree to attempt to settle amicably any
                  controversy or claim arising under this AGREEMENT or a breach
                  of this AGREEMENT, except for appeals of modifications or
                  termination decisions provided for in Article 13. LICENSEE
                  shall first appeal any such unsettled claims or controversies
                  to the designated PHS official, or designee, whose decision
                  shall be considered the final agency decision. Thereafter,
                  LICENSEE may exercise any administrative or judicial remedies
                  that may be available.

         14.13    Nothing relating to the grant of a license, nor the grant
                  itself, shall be construed to confer upon any person any
                  immunity from or defenses under the antitrust laws or from a
                  charge of patent misuse, and the acquisition and use of rights
                  pursuant to 37 CFR Part 404 shall not be immunized from the
                  operation of state or Federal law by reason of the source of
                  the grant.

         14.14    LICENSEE agrees to assign its rights, title, and interest in
                  the Drug Master File and related FDA documents such as IND's
                  and the like to NIH within thirty (30) days of termination of
                  this AGREEMENT.

         14.15    Paragraphs 4.03, 8.01, 9.05-9.07, 12.01-12.05, 13.08, 13.09,
                  14.12, and 14.14 of this AGREEMENT shall survive termination
                  of this AGREEMENT.

                          SIGNATURES BEGIN ON NEXT PAGE

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 13 of 22
<PAGE>

                    PHS PATENT LICENSE AGREEMENT -- EXCLUSIVE

                                 SIGNATURE PAGE

For PHS:

/s/ Jack Spiegel, Ph.D.                                                 4/16/99
-----------------------------------------------------                   --------
Jack Spiegel, Ph.D                                                      Date
Director, Division of Technology Development and Transfer
Office of Technology Transfer
National Institutes of Health

Mailing Address for Notices:

Office of Technology Transfer
National Institutes of Health
6011 Executive Boulevard, Suite 325
Rockville, Maryland 20852-3804 U.S.A.

For LICENSEE (Upon, information and belief, the undersigned expressly certifies
or affirms that the contents of any statements of LICENSEE made or referred to
in this document are truthful and accurate.):

By:

/s/ Michael T. Redman                                                   4/6/99
-----------------------------------------------------                   --------
Signature of Authorized Official                                        Date

Michael T. Redman
-----------------------------------------------------
Printed Name

Vice President, Business Development
-----------------------------------------------------
Title

Official and Mailing Address for Notices:

Zonagen, Inc.
2408 Timberloch Place B-4
The Woodlands, Texas 77380

Any false or misleading statements made, presented, or submitted to the
GOVERNMENT, including any relevant omissions, under this AGREEMENT and during
the course of negotiation of this AGREEMENT are subject to all applicable civil
and criminal statutes including Federal statutes 31 U.S.C. Sections 3801-3812
(civil liability) and 18 U.S.C. Section 1001 (criminal liability including
fine(s) and/or imprisonment).

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 14 of 22
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

                  APPENDIX A-PATENT(S) OR PATENT APPLICATION(S)

PATENT(S) OR PATENT APPLICATION(S):

1.       60/016,628, filed May 1, 1996, entitled "21 Substituted Progesterone
         Derivatives as New Anti-Progestational Agents."

2.       PCT/US97/01636

3.       [ ** ]

4.       [ ** ]

5.       [ ** ]

6.       [ ** ]

7.       [ ** ]

8.       [ ** ]

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 15 of 22

<PAGE>

            APPENDIX B--LICENSED FIELDS-OF-USE AND LICENSED TERRITORY

LICENSED FIELDS-OF-USE: Treatment of human endocrinologic pathologies or
conditions in steroid-sensitive tissues.

LICENSED TERRITORY: Worldwide

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 16 of 22
<PAGE>

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

                              APPENDIX C-ROYALTIES

         ROYALTIES:

         1.)      For the rights, privileges and license granted herein,
                  LICENSEE shall pay royalties to PHS on the LICENSED PATENT
                  RIGHTS to practice LICENSED PROCESSES and/or sell LICENSED
                  PRODUCTS in the LICENSED TERRITORY in the manner herein
                  provided until the expiration of this AGREEMENT or until this
                  AGREEMENT shall be terminated, whichever shall occur first:

                  (i)      LICENSEE shall pay PHS a noncreditable, nonrefundable
                           license issue royalty in the amount of [ ** ] within
                           thirty (30) days from the EFFECTIVE DATE of this
                           AGREEMENT.

                  (ii)     LICENSEE shall pay the following Benchmark royalties:

                           a.       [ ** ] within thirty (30) days of initiation
                                    of the first Phase I clinical study of the
                                    first LICENSED PRODUCT in the United States
                                    (including, its Territories and
                                    Possessions), any European country or Japan.

                           b.       [ ** ]within thirty (30) days of initiation
                                    of the first Phase III clinical study of the
                                    first LICENSED PRODUCT in the United States
                                    (including its Territories and Possessions),
                                    any European country, or Japan.

                           c.       [ ** ] within thirty (30) days of filing the
                                    first New Drug Application for a LICENSED
                                    PRODUCT with the United States FDA.

                           d.       [ ** ] within thirty (30) days of filing the
                                    first new drug application for a LICENSED
                                    PRODUCT with the appropriate agency or
                                    regulatory body of any European country.

                           e.       [ ** ] within thirty (30) days of receipt of
                                    an "approvable" letter for the first
                                    LICENSED PRODUCT from the FDA. LICENSEE may
                                    offset up to fifty percent (50%) of this [
                                    ** ] Benchmark royalty at a rate no greater
                                    than fifty percent (50%) of annual earned
                                    royalties.

                           f.       [ ** ] within thirty (30) days of receipt of
                                    notice of approval to market the first
                                    LICENSED PRODUCT in any European country.

                           g.       [ ** ] within thirty (30) days of receipt of
                                    notice of approval to market the first
                                    LICENSED PRODUCT in Japan.

                  (iii)    Licensee shall pay PHS a patent reimbursement royalty
                           equal to, a.) costs incurred by PHS prior to the
                           EFFECTIVE DATE of this AGREEMENT attributable to the
                           filing, prosecution and maintenance of foreign patent
                           applications and patents, and b.) costs incurred by
                           PHS on or after the EFFECTIVE DATE of this AGREEMENT
                           attributable to the filing, prosecution and
                           maintenance of U.S. and foreign patent applications
                           and patents. LICENSEE shall pay any such patent
                           reimbursement royalties within sixty (60) days of the
                           date of invoice.

                  (iv)     If LICENSEE or its AFFILIATE(S) is the direct
                           marketer, LICENSEE and its AFFILIATES shall pay PHS
                           earned royalties on NET SALES in countries in which a
                           VALID CLAIM exists as follows:

                                    1.       [ ** ] of annual NET SALES on the
                                             first [ ** ] of NET SALES each
                                             calendar year.

                                    2.       [ ** ] of annual NET SALES greater
                                             than [ ** ] NET SALES each calendar
                                             year.

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 17 of 22
<PAGE>

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

         (v)      If SUBLICENSEE sells LICENSED PRODUCT(S), LICENSEE shall pay
                  PHS an annual earned royalty on SUBLICENSEE NET SALES equal to
                  the greater of [ ** ] of all SUBLICENSEE NET SALES, or [ ** ]
                  of all earned royalties on SUBLICENSEE NET SALES payable to
                  LICENSEE by its SUBLICENSEES.

The annual earned royalty rate applied to NET SALES of LICENSEE, its AFFILIATES,
and SUBLICENSEES for the purpose of calculating annual earned royalties earned
and due PHS under Paragraphs (iv) and (v) shall be reduced under the following
terms and conditions:

                  1.       [ ** ]

The annual earned royalty rate applied to NET SALES of LICENSEE and its
AFFILIATES, for the purpose of calculating annual earned royalties earned and
due PHS under Paragraph (iv) shall be reduced under the following terms and
conditions:

                  2.       [ ** ]

         (vi)     LICENSEE and its AFFILIATES shall pay PHS an additional
                  royalty equal to [ ** ] of all other consideration LICENSEE
                  and its AFFILIATES receive or shall receive from each
                  SUBLICENSEE. Any such additional royalty payments are
                  independent and additional to any and all other royalty
                  payments due hereunder.

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 18 of 22
<PAGE>

                            APPENDIX D--MODIFICATIONS

PHS and LICENSEE agree to the following modifications to the Articles and
Paragraphs of this AGREEMENT: None

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 19 of 22
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

                     APPENDIX E--BENCHMARKS AND PERFORMANCE

LICENSEE agrees to the following BENCHMARKS for the purpose of measuring its
performance under this AGREEMENT. LICENSEE shall notify PHS in writing within
thirty (30) days of achieving all such BENCHMARKS. They are:

<TABLE>
<CAPTION>
           BENCHMARK                                                           DATE
           ---------
<S>        <C>                                                                 <C>
1.         Select first lead compound for development                          [ ** ]
2.         Initiate acute toxicology studies                                   [ ** ]
3.         Complete acute toxicology studies                                   [ ** ]
4.         Initiate Sub-acute toxicology studies                               [ ** ]
5.         Initiate chronic toxicology studies                                 [ ** ]
6.         Complete chronic toxicology studies (6 month)                       [ ** ]
7.         Complete chronic toxicology studies (1 year)                        [ ** ]
8.         Initiate two year carcinogenicity study                             [ ** ]
9.         Complete two year carcinogenicity study                             [ ** ]
10.        Initiate Phase I clinical trial.                                    [ ** ]
11.        Initiate Phase II/III clinical trial.                               [ ** ]
12.        File NDA in the U.S.                                                [ ** ]
13.        File for approval to market first LICENSED PRODUCT in Japan         [ ** ]
14.        File for approval to market first LICENSED PRODUCT in Europe        [ ** ]
</TABLE>

Additional BENCHMARKS corresponding to the development of LICENSED PRODUCTS for
labor induction/cervical ripening, male contraception, meningiomas and breast
cancer, as discussed in the COMMERCIAL DEVELOPMENT PLAN (See Charts A through
D), shall be updated within 12 months of the EFFECTIVE DATE of this AGREEMENT.
Notwithstanding the above, the parties recognize that such BENCHMARKS may be
reasonably be modified from time to time.

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 20 of 22
<PAGE>

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

                     APPENDIX E--BENCHMARKS AND PERFORMANCE

LICENSEE agrees to the following BENCHMARKS for the purpose of measuring its
performance under this AGREEMENT. LICENSEE shall notify PHS in writing within
thirty (30) days of achieving all such BENCHMARKS. They are:

<TABLE>
<CAPTION>
           BENCHMARK                                                           DATE
           ---------
<S>        <C>                                                                 <C>
1.         Select first lead compound for development                          [ ** ]
2.         Initiate acute toxicology studies                                   [ ** ]
3.         Complete acute toxicology studies                                   [ ** ]
4.         Initiate Sub-acute toxicology studies                               [ ** ]
5.         Initiate chronic toxicology studies                                 [ ** ]
6.         Complete chronic toxicology studies (6 month)                       [ ** ]
7.         Complete chronic toxicology studies (1 year)                        [ ** ]
8.         Initiate two year carcinogenicity study                             [ ** ]
9.         Complete two year carcinogenicity study                             [ ** ]
10.        Initiate Phase I clinical trial.                                    [ ** ]
11.        Initiate Phase II/III clinical trial.                               [ ** ]
12.        File NDA in the U.S.                                                [ ** ]
13.        File for approval to market first LICENSED PRODUCT in Japan         [ ** ]
14.        File for approval to market first LICENSED PRODUCT in Europe        [ ** ]
</TABLE>

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 21 of 22
<PAGE>

                     APPENDIX F--COMMERCIAL DEVELOPMENT PLAN

Zonagen/PHS Exclusive Patent License L-354-98/0
April 5, 1999 - Final Page 22 of 22

<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

                                   L-354-98/1

                      AMENDMENT TO PATENT LICENSE AGREEMENT

         Effective the date of signature of the last party to sign this
amendment to license L-354-98/0 ("AMENDMENT"), the Public Health Service
("PHS"), through the Office of Technology Transfer of the National Institutes of
Health, having its principle office at 6011 Executive Boulevard, Suite 325,
Rockville, MD 20852, U.S.A., and Zonagen, Inc. ("LICENSEE"), a Delaware
corporation, having its principle office at 2408 Timberloch Place, Suite B-4,
The Woodlands, Texas 77280, agree as follows:

         1.       BACKGROUND

                  1.1      PHS and LICENSEE entered into a license agreement
                  (L-354-98/0) on April 16, 1999 (hereinafter referred to as
                  "AGREEMENT").

                  1.2      The AGREEMENT by and between PHS and LICENSEE granted
                  LICENSEE an exclusive license under the LICENSED PATENT RIGHTS
                  in the LICENSED TERRITORY to make and have made, to use and
                  have used, to sell and have sold, to offer to sell, and to
                  import LICENSED PRODUCTS in the LICENSED FIELDS-OF-USE and to
                  practice and have practiced any LICENSED PROCESSES in the
                  LICENSED FIELD-OF-USE.

                  1.3      The LICENSEE and PHS now wish to amend the AGREEMENT
                  to facilitate the development of LICENSED PRODUCTS under the
                  LICENSED PATENT RIGHTS.

         2.       AMENDMENT TO THE AGREEMENT

                  Insert a new paragraph 14.16 as follows:

                  "If available, on a one-time basis, PHS agrees to supply
                  LICENSEE with material produced under the LICENSED PATENT
                  RIGHTS for LICENSEE use under the terms and conditions of the
                  AGREEMENT. For purposes of this AMENDMENT such material shall
                  mean five (5) grams of [ ** ], as supplied by the National
                  Institute of Child Health and Human Development at the
                  National Institutes of Health."

                          SIGNATURES BEGIN ON NEXT PAGE

NIH Office of Technology Transfer- L-354-98/1
Amendment to Patent License Agreement
Page 1 - Zonagen, Inc. - June 24, 1999 Final

<PAGE>

IN WITNESS WHEREOF, PHS and the LICENSEE have caused this AMENDMENT to be signed
below by their duly authorized representatives on the day and year set forth
below.

Public Health Service (PHS)

By:  /s/ Jack Spiegel, Ph.D.                                 Date: 6/24/99
    ----------------------------------------                       -------------
Jack Spiegel, Ph.D
Director, Division of Technology Development and Transfer
Office of Technology Transfer
National Institutes of Health

For Zonagen, Inc.

By:  /s/ Michael T. Redman                                   Date: 6/25/99
    ----------------------------------------                       -------------

  Michael T. Redman
--------------------------------------------
Typed Name

 VP, Business Development
--------------------------------------------
Title:

NIH Office of Technology Transfer- L-354-98/1
Amendment to Patent License Agreement
Page 2 - Zonagen, Inc. - June 24, 1999 Final
<PAGE>

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "**" and have been filed separately
with the Securities and Exchange Commission.

                                   L-354-98/2

                  SECOND AMENDMENT TO PATENT LICENSE AGREEMENT

         Effective the date of signature of the last party to sign this second
amendment to license L-354-98/0 ("SECOND AMENDMENT"), the Public Health Service
("PHS"), through the Office of Technology Transfer of the National Institutes of
Health, having its principal office at 6011 Executive Boulevard, Suite 325,
Rockville, MD 20852, U.S.A., and Zonagen, Inc. ("LICENSEE"), a Delaware
corporation, having its principal office at 2408 Timberloch Place, Suite B-4,
The Woodlands, Texas 77280, agree as follows:

WHEREAS:

         PHS and LICENSEE entered into a license agreement (L-354-98/0) on April
         16, 1999 (hereinafter referred to as "AGREEMENT"), which was amended
         June 25, 1999.

         The AGREEMENT by and between PHS and LICENSEE granted LICENSEE an
         exclusive license under the LICENSED PATENT RIGHTS in the LICENSED
         TERRITORY to make and have made, to use and have used, to sell and have
         sold, to offer to sell, and to import LICENSED PRODUCTS in the LICENSED
         FIELDS-OF-USE and to practice and have practiced any LICENSED PROCESSES
         in the LICENSED FIELD-OF-USE.

         The LICENSEE and PHS now wish to amend the AGREEMENT a second time to
         facilitate the development of LICENSED PRODUCTS under the LICENSED
         PATENT RIGHTS.

NOW THEREFORE:

         Insert a new paragraph 14.17 as follows:

                  "Upon receipt of a [ ** ] royalty, PHS agrees to supply
                  LICENSEE with 2 grams of material produced under the LICENSED
                  PATENT RIGHTS, for LICENSEE use, under the terms and
                  conditions of the AGREEMENT. For purposes of this SECOND
                  AMENDMENT, such material shall mean two (2) grams of
                  [ ** ], as supplied by the National Institute of Child Health
                  and Human Development at the National Institutes of Health."

Unless otherwise defined in this SECOND AMENDMENT, terms in bold print shall
have meaning as defined in the AGREEMENT. In all other respects, the AGREEMENT
is confirmed and ratified.

                          SIGNATURES BEGIN ON NEXT PAGE

NIH Office of Technology Transfer- L-354-98/2
Second Amendment to Patent License Agreement
Zonagen, Inc. - June 6, 2000 Final
<PAGE>

IN WITNESS WHEREOF, PHS and the LICENSEE have caused this SECOND AMENDMENT to be
signed below by their duly authorized representatives on the day and year set
forth below.

Public Health Service (PHS)

By:  /s/ Jack Spiegel, Ph.D.                                 Date: 8/7/00
    ----------------------------------------                       -------------
Jack Spiegel, Ph.D
Director, Division of Technology Development and Transfer
Office of Technology Transfer
National Institute of Health

For Zonagen, Inc.

By: /s/ Michael T. Redman                                    Date: 6/29/00
    ---------------------------------------                        -------------

 Michael T. Redman
-------------------------------------------
Typed Name

 VP, Business Development
-------------------------------------------
Title:

NIH Office of Technology Transfer- L-354-98/2
Second Amendment to Patent License Agreement
Zonagen, Inc. - June 6, 2000 Final
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

                                   L-354-98/3

                   THIRD AMENDMENT TO PATENT LICENSE AGREEMENT

         Effective the date of signature of the last party to sign this third
amendment to license L-354-98/0 ("THIRD AMENDMENT"), the Public Health Service
("PHS"), through the Office of Technology Transfer of the National Institutes of
Health, having its principal office at 6011 Executive Boulevard, Suite 325,
Rockville, MD 20852, U.S.A., and Zonagen, Inc. ("LICENSEE"), a Delaware
corporation, having its principal office at 2408 Timberloch Place, Suite B-4,
The Woodlands, Texas 77280, agree as follows:

WHEREAS:

PHS and LICENSEE entered into a license agreement (L-354-98/0) on April 16, 1999
(hereinafter referred to as "AGREEMENT"), which was amended June 25, 1999 and
August 7, 2000.

The AGREEMENT by and between PHS and LICENSEE granted LICENSEE an exclusive
license under the LICENSED PATENT RIGHTS in the LICENSED TERRITORY to make and
have made, to use and have used, to sell and have sold, to offer to sell, and to
import LICENSED PRODUCTS in the LICENSED FIELDS-OF-USE and to practice and have
practiced any LICENSED PROCESSES in the LICENSED FIELD-OF-USE.

The LICENSEE and PHS now wish to amend the AGREEMENT a third time to facilitate
the development of LICENSED PRODUCTS under the LICENSED PATENT RIGHTS.

NOW THEREFORE:

         1.       Replace APPENDIX E- BENCHMARKS AND PERFORMANCE as follows:

LICENSEE agrees to the following BENCHMARKS for the purpose of measuring its
performance under this AGREEMENT. LICENSEE shall notify PHS in writing within
thirty (30) days of achieving all such BENCHMARKS. They are as follows:

<TABLE>
<CAPTION>
           BENCHMARK                                                                            DATE
<S>        <C>                                                                                  <C>
1.         Select lead compound                                                                 [ ** ]
2.         Complete synthesis development (pending successful synthesis development)            [ ** ]
3.         Complete development of pilot scale synthesis
                     (pending successful synthesis development)                                 [ ** ]
4.         Prepare GMP test material (pending successful synthesis development)                 [ ** ]
5.         Preclinical toxicity test (Ames etc.)                                                [ ** ]
6.         Design / Schedule preclinical safety studies                                         [ ** ]
7.         Start acute toxicology studies                                                       [ ** ]
8.         Complete acute toxicology studies                                                    [ ** ]
9.         Start sub-acute toxicology studies                                                   [ ** ]
10.        Complete sub-acute toxicology studies                                                [ ** ]
11.        Initiate chronic toxicology studies                                                  [ ** ]
12.        Compete chronic toxicology studies (6 month)                                         [ ** ]
13.        Complete chronic toxicology studies (1 year)                                         [ ** ]
14.        Initiate 2-year carcinogenicity study                                                [ ** ]
15.        Complete 2-year carcinogenicity study                                                [ ** ]
16.        IND submission - uterine fibroids                                                    [ ** ]
17.        Initiate Phase I Clinical trial                                                      [ ** ]
18.        Initiate Phase II/III Clinical trials                                                [ ** ]
19.        File NDA in the US                                                                   [ ** ]
20.        File for approval LICENSED PRODUCT in Japan                                          [ ** ]
21.        File for approval LICENSED PRODUCT in Europe                                         [ ** ]
</TABLE>

NIH Office of Technology Transfer- L-354-98/3
Third Amendment to Patent License Agreement
Zonagen, Inc. - May 9, 2002

<PAGE>

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "**" and have been filed separately
with the Securities and Exchange Commission.

Additional BENCHMARKS corresponding to the development of LICENSED PRODUCTS for
labor induction/cervical ripening, male contraception, meningiomas and breast
cancer, as discussed in the COMMERCIAL DEVELOPMENT PLAN (See Charts A through
D), shall be updated at the time of IND submission (July 2004). Notwithstanding
the above, the parties recognize that such BENCHMARKS may be reasonably
modified.

         2.       A noncreditable, nonrefundable amendment royalty of [ ** ]
                  shall be due and payable within 30 days of execution of this
                  AMENDMENT;

         3.       This Amendment shall become effective immediately upon
                  execution by all Parties;

         4.       Except as set forth herein, the AGREEMENT shall continue
                  unchanged and in full force and effect; and

         5.       This AMENDMENT may be executed in multiple counterparts, each
                  of which so executed shall be deemed to be an original, but
                  all such counterparts shall together constitute but one and
                  the same AMENDMENT.

Unless otherwise defined in this THIRD AMENDMENT, terms in bold print shall have
meaning as defined in the AGREEMENT. In all other respects, the AGREEMENT is
confirmed and ratified.

                          SIGNATURES BEGIN ON NEXT PAGE

NIH Office of Technology Transfer- L-354-98/3
Third Amendment to Patent License Agreement
Zonagen, Inc. - May 9, 2002

<PAGE>

                                 SIGNATURE PAGE

IN WITNESS WHEREOF, the parties hereto have caused this AMENDMENT to be executed
by their duly authorized representatives as of the last signature date below.

FOR PUBLIC HEALTH SERVICE:

<TABLE>
<S>                                               <C>                                           <C>
By: /s/ Jack Spiegel, Ph.D.                                                                       7/8/2002
    ----------------------------------------                                                    -------------------------
           Jack Spiegel, Ph.D                                                                     Date
           Director, Division of Technology
           Development and Transfer
           National Institutes of Health

       Mailing Address for Notices:               Office of Technology Transfer
                                                  National Institutes of Health
                                                  6011 Executive Boulevard
                                                  Rockville, Maryland 20852-3804

FOR LICENSEE:

By:   /s/ Joseph S. Podolski                                                                      7/11/2002
    -----------------------------                                                               --------------------------
                Signature                                                                        Date

      Joseph S. Podolski
    -----------------------------
                Printed Name

         President and CEO
    -----------------------------
                Title

    Mailing Address for Notices:
                                                  ------------------------------

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

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

                                                  ------------------------------
</TABLE>

NIH Office of Technology Transfer- L-354-98/3
Third Amendment to Patent License Agreement
Zonagen, Inc. - May 9, 2002

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