LICENSE AGREEMENT

1.1

MICHIGAN has developed rights, including potential patent rights, in the "Technology" as defined below.

1.2

Drs. Steven Goldstein, Jeffrey Bonadio and Robert Levy have founded and are all shareholders of MATRIGEN and current or former employees of MICHIGAN, and have contributed to the creation of the Technology. They have elected and have agreed to receive rewards for commercialization of the Technology through the operation and ownership of MATRIGEN rather than through the royalty distribution policy of MICHIGAN.

1.2

MATRIGEN desires to obtain, and MICHIGAN, consistent with its mission of education and research, desires to grant a license of the Technology on the terms and conditions listed below.

2.1

"Field of Use" shall refer to the field within which Products may be designed, manufactured, used and/or marketed under this Agreement, which shall be as follows:

(a)

With respect to the Technology described in Subparagraph 2.10 (a) below, "Field of Use" shall mean all fields except: (i) the delivery of cyto-skeletal inhibitors for treatment or prevention of cardiovascular disease and cardiovascular trauma; (ii) the use of heparin or dexamethasone for the treatment or prevention of restenosis or other cardiovascular disease or cardiovascular trauma; and (iii) the oral delivery of vaccines.

(b)

With respect to the Technology described in Subparagraphs 2.10 (b) and (c) below, "Field of Use" shall mean all fields.

2.2

"First Commercial Sale" shall mean the first sale of any Product by MATRIGEN or a Sublicensee, other than for use in clinical trials being conducted to obtain FDA or other governmental approvals to market Products.

2.3

"Improvement(s)" shall mean any invention which: (a) was invented in whole or in part by Jeffrey Bonadio, Steven Goldstein, or Robert Levy (each, a "Founding Scientist"); (b) was made within three years of the Effective Date; (c) is not, at the time the invention is made, subject to option, license, ownership or other proprietary rights by any private third party sponsor of research at MICHIGAN; and (d) is effectively practiced only by the coincident practice of Valid Claims of Licensed Patents identified as of the Effective Date on Exhibit "A".

2.4

"Licensed Patent(s)" shall mean: (a) those patents and patent applications identified on Exhibit "A" attached hereto; (b) all patents and patent applications in which MICHIGAN has or acquires a property interest which cover an invention included in the Technology; (c) all patents and patent applications in which MICHIGAN has or acquires a property interest which cover an invention included in the Improvements, but only to the extent of the inventive contribution of the Founding Scientists*; and (d) substitutions, extensions, reissues, renewals, divisions, continuations, continuations-in-part and foreign equivalent patent applications and Patent Cooperation Treaty filings of or from (a), (b), or (c), and all patents issuing therefrom.

2.5

"Net Sales" shall mean the sum of all amounts received and all other consideration received (or, when in a form other than dash or its equivalent, the fair market value thereof when received) by MATRIGEN and its Sublicensees due to or by reason of the sale, distribution or use of Products, less the following deductions and offsets, but only to the extent such sums are otherwise included in the computation of Net Sales, or are paid by MATRIGEN or Sublicensees and not otherwise reimbursed: (a) refunds, rebates, replacements or credits actually allowed and taken by purchasers for return of Products; (b) customary trade, quantity and cash discounts actually allowed and taken; (c) excise, value-added, and sales taxes actually paid by MATRIGEN or Sublicensees for Products; and (d) shipping and handling charges actually paid by MATRIGEN or Sublicensees for Products.

2.6

"Parties," in singular or plural usage as required by the context, shall mean MATRIGEN and/or MICHIGAN.

2.7

"Product(s)" shall mean: (a) any goods or services whose manufacture, use or sale in any country would, but for this Agreement, comprise an infringement, including contributory infringement, of one or more Valid Claims; and (b) any goods or services incorporating, or the manufacture, use or sale of which utilizes Technology.

2.8

"Sublicensee(s)" shall mean any person or entity, including any affiliate of MATRIGEN, sublicensed by MATRIGEN under this Agreement to make, have made, use, market or sell Products within the Field of Use.

2.9

"Sublicensing Revenues" shall mean all amounts received and all other consideration received (or, when in a form other than cash or its equivalent, the fair market value thereof when received) by MATRIGEN pursuant to any sublicense to a Sublicensee, excluding payments or other consideration reasonably documented by MATRIGEN and for or in the form of: (a) the purchase of MATRIGEN stock or other securities or evidences of ownership in MATRIGEN; (b) for or as reimbursement for the conduct of sponsored research or development; (c) for or as reimbursement for patenting or other out-of-pocket expenses; or (d) royalties on the sale or use of Products by a Sublicensee.

2.10

"Technology", as used in this Agreement, shall mean all information, manufacturing techniques, data, designs or concepts (whether or not such specific information, manufacturing techniques, data, designs, or concepts are or become publicly known or available) covering:

(a)

the surface modified biodegradable nanoparticles and methods of making and using same, useful in delivering bioactive material into biological systems, developed by MICHIGAN’S employees Dr. Vinod Labhasetwar, Dr. Robert Levy, and Dr. Cunxian Song, as described in MICHIGAN’s Technology Management Office File Nos. 800, 800pl, and 938 all entitled "Surface Modified Biodegradable Nanoparticles and Methods of Making and Using Same," and File No. 1019 entitled "Biodegradable Hydroxy-Terminated Poly (epsilon-caprolactone) – Polyether Multi-Block Biodegradable Co-polymers: Useful Drug Carriers for Biologically Active Agents," encompassing U.S. Patent Application Nos. 08/369,541 and 08/389,893 both entitled "Surface Modified Biodegradable Nanoparticles and Methods of Making and Using Same;"

(b)

certain genes and means of transferring gene segments into cells of bone and other tissues, developed by MICHIGAN’S employees Dr. Jeffrey Bonadio, Dr. Jianming Fang, Dr. Steven Goldstein, Dr. Blake Roessler, and Dr. Wushan Yin, as described in MICHIGAN’S Technology Management Office File No. 926 entitled "Gene Transfer into Bone and

Tissues," and File Nos. 926p1, 926p2 and 926p3 all entitled "Methods and Compositions for Stimulating Bone Cells," encompassing U.S. Patent Application No. 08/199,780 entitled "Gene Transfer into Bone and Tissues," No. 08/316,650 entitled "Methods and Compositions for stimulating Bone Cells," and No. PCT/US95/02251 entitled "Methods and Compositions for Stimulating Bone Cells," and a U.S. Patent Application filed June 7, 1995 entitled "Latent TGFß Binding Protein (LTBP) Genes, Compositions and Methods;" and

(c)

certain genes, gene segments and cDNA clones, all related to the TGFß-superfamily of genes, and a method for the isolation of such genes, developed by MICHIGAN’S employees Jeffrey Bonadio and Jianming Fang, as described in MICHIGAN’S Technology Management Office File No. 1116.

2.11

"Valid Claim(s)" means any claim(s) in an unexpired patent or pending in a patent application included within the Licensed Patents which has not been held unenforceable, unpatentable, or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer. If in any country there should be two or more such decisions conflicting with respect to the validity of the same claim, the decision of the higher or highest tribunal shall thereafter control; however, should the tribunals be of equal rank, then the decision or decisions upholding the claim shall prevail when the conflicting decisions are equal in number, and the majority of decisions shall prevail when the conflicting decisions are unequal in number.

3.1

MICHIGAN hereby grants to MATRIGEN the exclusive, world-wide license under the Licensed Patents to make, have made, use, market and sell Products within the Field of Use; with the right to grant sublicenses to Sublicensees subject to the terms and provisions of Article 8 below.

3.2

MICHIGAN hereby grants to MATRIGEN the world-wide right to practice the Technology to make, have made, use, market and sell Products within the Field of Use. During the term of this Agreement MICHIGAN covenants not to enter into any agreement allowing any other party to commercially practice the Technology to make, have made, use, market or sell Products within the Field of Use.

3.3

It is understood that the fields reserved in Subparagraphs 2.1 (a) (i-iii) are so reserved by virtue of options to third parties to

parties to acquire licenses (either to the Technology licensed in this Agreement or to related technologies under research funded by the third party) within the scope of these reserved fields which predate the Effective Date. In the event that any such option expires without exercise or, having been exercised, the rights granted revert to MICHIGAN during the term of this Agreement, then the "Field of Use" as defined herein shall be deemed expanded accordingly, and the Parties shall promptly amend that definition by written amendment to this Agreement.

3.4

MICHIGAN reserves the right to license and practice the Technology and the Licensed Patents for any purpose outside of the Field of Use, and the right to practice the Technology and the Licensed Patents solely for research and education purposes within the Field of Use.

3.5

MICHIGAN further reserves the right to grant to the U.S. Government a nonexclusive, irrevocable, royalty-free license or licenses, with the right to sublicense, to all patent applications and resulting patents included in the Technology and the Licensed Patents, to the extent, that such grant of license(s) is or may be required by research funding agreements between MICHIGAN and the U.S. Government relating to the Technology or the Licensed Patents.

4.1

MATRIGEN shall pay MICHIGAN, with respect to each calendar quarter, a royalty equal to:

(a)

two percent of Net Sales for all Products defined under Subparagraph 2.7 (a) above; and

(b)

one-and one-half percent of Net Sales of MATRIGEN and Sublicensees for all other Products, where such Net Sales are generated within five years of the First Commercial Sale of any Products.

4.2

MATRIGEN shall also pay MICHIGAN a royalty equal to five percent of all sublicensing Revenues. All amounts paid under this Paragraph 4.2 pursuant to Sublicensing Revenues generated from a particular Sublicensee may be credited by MATRIGEN against any royalties accrued under Paragraph 4.1 pursuant to Net Sales generated by that Sublicensee.

4.3

The obligation to pay MICHIGAN a royalty under this Article 4 is imposed only once with respect to the same unit of Product regardless of the number of Valid Claims or Licensed Patents covering the same; however, for purposes of determination of payments due hereunder, whenever the term "Product" may apply to a property during various stages of manufacture, use or sale, Net Sales, as otherwise defined, shall be derived from the sale, distribution or use of such Product by MATRIGEN or Sublicensees at the stage of its highest invoiced value to unrelated third parties.

4.4

MATRIGEN shall transfer to MICHIGAN upon execution of this Agreement, shares of MATRIGEN stock according to the terms of the Stock Transfer Agreement which is attached hereto as Exhibit B. The Parties acknowledge that this transfer of stock is further consideration for the license rights herein granted, and that the royalty rates In Paragraphs 4.1 and, 4.2 have been agreed upon in recognition of this, further consideration. MATRIGEN’s material obligations under the Stock Transfer Agreement shall be deemed to be material obligations under this Agreement and uncured breach thereof shall give rise to the remedies set forth herein and otherwise provided by law or equity.

4.5

MATRIGEN and MICHIGAN shall execute, simultaneously with this Agreement, an agreement under which MATRIGEN shall fund continued research relating to the Technology by MICHIGAN for a minimum of twelve months. Such agreement shall be consistent with the procedures and terms contained in the Roundtable Research Agreement attached hereto as Exhibit "C". MATRIGEN’s continuing responsibilities under such a research agreement, including a funding obligation of at least $600,000, are incorporated into this Article 4 as necessary consideration for the continuing license rights granted by this Agreement. A copy of the research agreement shall be attached to this Agreement as Exhibit "D" upon its execution.

5.1

Within 90 days after the close of each calendar quarter during the term of this Agreement (including the close of any calendar quarter immediately following any termination of this Agreement), MATRIGEN shall report to MICHIGAN all royalties accruing to MICHIGAN hereunder during such calendar quarter. Such quarterly reports shall indicate for each calendar quarter the gross sales and Net sales of Products by MATRIGEN and Sublicensees; such reports shall also indicate the source and amount of all Sublicensing Revenues and any other revenues with respect to which payments are due, and the amount of such payments, as well as the various calculations used to arrive at said amounts, including the quantity, description (nomenclature and type designation) , country of manufacture and country of sale of Products. In case no payment is due for any such period, MATRIGEN shall so report.

5.2

MATRIGEN shall promptly establish and consistently employ a system of specific nomenclature and type designations for Products so that various types can be identified and segregated, where necessary; MATRIGEN and Sublicensees shall consistently employ such system when rendering invoices thereon and henceforth agree to inform MICHIGAN, or its independent auditors, when requested as to the details concerning such nomenclature system as well as to all additions thereto and changes therein.

5.3

MATRIGEN shall keep, and shall require its Sublicensees to keep, true and accurate records and books of account containing data reasonably required for the commutation and verification of payments to be made as provided by this Agreement; which records and books shall be open for inspection upon reasonable notice during business hours by an independent certified public accountant reasonably selected by MICHIGAN, for the purpose of verifying the amount of payments due and payable. Said right of inspection will exist for five years from the date of origination of any such record (this five year right of inspection shall not be deemed to foreshorten any statute of limitations period applicable to any potential claim), and this requirement and right of inspection shall survive any termination of this Agreement. MICHIGAN shall be responsible for all expenses of such inspection, except that if such inspection reveals an underpayment of royalties to MICHIGAN in excess of 10 percent, then said inspection shall be at MATRIGEN’s expense and such underpayment shall become immediately due and payable to MICHIGAN.

5.4

The reports provided for hereunder shall be certified by an authorized representative of MATRIGEN to be correct to the best of MATRIGEN’s knowledge and information.

6.1

Payments accrued during each calendar quarter shall be due and payable on the date each quarterly report is due (as provided in Paragraph 5.1), shall be included with such report and shall be paid in United States dollars. All payments due hereunder shall be made either by wire transfer to such account and according to such reasonable deposit instructions as may be identified by MICHIGAN from time to time or by check made payable to "The Regents of The University of Michigan," and sent according to the instructions for notices set forth hereinbelow.

6.2

On all amounts outstanding and payable to MICHIGAN, interest shall accrue from the date such amounts are due and payable

at two percentage points above the prime lending rate as established by the Chase Manhattan Bank, N.A., in New York City, New York, or at such lower rate as may be required by law.

6.3

Where Net Sales are generated or Sublicensing Revenues are received in foreign currency, such foreign currency shall be converted into its equivalent in United States dollars at the closing selling rate for such currency as reported (or if erroneously reported, as subsequently corrected) in the Wall Street Journal on the last business day of the calendar quarter during which such payments are received by MATRIGEN or Sublicensees (or if not reported on that date, as quoted by the Chase Manhattan Bank, N.A., in New York City, New York).

6.4

Except as provided in the definition of Net Sales or as required by law, all royalty payments to MICHIGAN under this Agreement shall be without deduction for sales, use, excise, personal property or other similar taxes or other duties imposed on such payments by the government of any country or any political subdivision thereof; and any and all such taxes or duties shall be assumed by and paid by MATRIGEN or Sublicensees.

7.1

It is understood that MATRIGEN has the responsibility, as between MATRIGEN and MICHIGAN, to do all that is necessary for any governmental approvals to sell Products.

7.2

MATRIGEN agrees to use reasonable efforts to develop Products, obtain all government approvals necessary, and manufacture and sell Products at the earliest possible date; to effectively exploit, market and manufacture in sufficient quantities to meet anticipated customer demand; and to make the benefits of the Products reasonably available to the public at all times during the term of this Agreement.

7.3

To the extent required by law (including the extent to which MICHIGAN is required by 37 CFR 401.14 to require this obligation of MATRIGEN), MATRIGEN agrees to substantially manufacture or have manufactured all Products in the United States.

7.4

Within 15 days of the First Commercial Sale of each