8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 19, 2005

PROTEIN POLYMER TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-19724	33-0311631
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

10655 Sorrento Valley Road, San Diego, California	92121
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (858) 558-6064

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On November 23, 2005, Protein Polymer Technologies, Inc. (the “Company”) entered into an Asset Purchase Option Agreement (the “Option Agreement”), dated as of the same date, by and between the Company and Surgica Corporation (“Surgica”) pursuant to which the Company is granted a one-year option (and a one-year option extension) to acquire substantially all of Surgica’s assets in exchange for two million (2,000,000) shares of the Company’s Common Stock (the “Shares”) and a potential future incentive issuance of additional Company Common Stock (the “Earnout Shares”) based on the future sales performance of Surgica’s products during the first quarter of 2007. The Shares and the Earnout Shares are sometimes referred to herein individually and collectively as the “Securities”. The full text of the Option Agreement is included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 23, 2005 and is incorporated herein by reference in its entirety. On December 15, 2005 the Company and Surgica entered into a First Amendment to the Asset Purchase Option Agreement, pursuant to which the parties agreed to extend the effective date of the option granted pursuant to the Option Agreement from December 17, 2005 to December 19, 2005.

On December 19, 2005 the Option Agreement closed pursuant to its terms. Concurrently with the closing of the Option Agreement (the “Option Closing”), the Company and Surgica entered into a License Agreement and Supply and Services Agreement, pursuant to which the Company acquired exclusive rights to Surgica’s technology and products.

The following is a brief summary of the transaction. This summary is qualified in its entirety by reference to the full text of the Option Agreement, License Agreement and Supply and Services Agreement, the latter two attached hereto as Exhibits 10.2 and 10.3 to this Current Report, and any reports, definitive proxy statements or information statements filed prior or subsequent to this Current Report by the Company under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed with the Securities Exchange Commission that relate to the transaction.

Asset Purchase Option Agreement

Under the terms of the Option Agreement, the Company will have the right to acquire substantially all of the assets of Surgica for (i) the Shares, and (ii) the Earnout Shares, if any, based on the future sales performance of Surgica’s products during the first quarter of 2007. The number of Earnout Shares, if any, will be based in

part on the price per share of the Company’s Common Stock based on the 90 day prior average price of the Company’s Common Stock as of April 1, 2007 (the “Trailing Average Price”). The option became effective as of the Option Closing and will be exercisable, at the sole discretion of the Company, for a term of up to two (2) years. Once Surgica is given notice of the Company’s intent to exercise the option, the exercise of the option itself will be subject to approval by Surgica’s stockholders.

License Agreement and Supply and Services Agreement

On December 19, 2005, the Company and Surgica entered into a License Agreement and Supply and Services Agreement. Under the terms of the License Agreement, the Company acquired exclusive rights to Surgica’s three embolization products, one issued patent, and technical and market know-how in return for (i) the assumption of up to approximately $650,000.00 of certain Surgica liabilities, including $200,000 in contingent liabilities, and (ii) a cash payment(s) to Surgica of up to approximately $400,000.00. Under the terms of the Supply and Services Agreement, Surgica is obligated to provide its goods and services, including further product development, in exchange for (i) operating payments to Surgica and (ii) a royalty of twenty-five percent (25%) of net profits, if any, on revenues generated by the sale of Surgica products.

Voting Agreement and Proxy

On November 23, 2005, the Company and Louis R. Matson entered into a Voting Agreement pursuant to which Louis R. Matson agreed to vote all shares of Surgica that he may own (i) in favor of the adoption of the Option Agreement and the grant of the option contemplated thereby; (ii) in favor of adoption of the Asset Purchase Agreement and approval of the acquisition contemplated thereby, but only to the extent that the option is exercised by the Company; (iii) against any proposal for any acquisition transaction, other than the acquisition, between Surgica and any person other than the Company and/or a wholly-owned subsidiary of the Company; and (iv) against any other action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Surgica under the Option Agreement or Asset Purchase Agreement or which would result in any of the conditions to the consummation of the effectiveness of the option under the Option Agreement or the acquisition under the Asset Purchase Agreement not being fulfilled. Concurrently with the execution of the Voting Agreement, and pursuant to the Voting Agreement’s terms, Louis R. Matson delivered to the Company an irrevocable proxy appointing the Company as the sole and exclusive attorney and proxy of Louis R. Matson, with full power of substitution and resubstitution, to vote and exercise all voting and related rights with respect to all shares of Surgica that he may own in accordance with (ii), (iii), and (iv) above.

Asset Purchase Agreement

Pursuant to the terms of the Option Agreement, the Company was granted an option, which became effective as of the Option Closing and which will be exercisable, at the sole discretion of the Company, for a term of up to two (2) years, to purchase substantially all of the assets of Surgica in exchange for the Shares and the Earnout Shares, if any, by entering into, and causing a to-be-formed, wholly-owned subsidiary of the Company to enter into, a definitive Asset Purchase Agreement with Surgica which will be subject to a number of conditions precedent, including approval by Surgica’s stockholders.

Pursuant to the terms of the Asset Purchase Agreement, the Securities shall constitute “restricted securities” as that term is defined in Section 144(a)(3) of the Securities Act of 1933, as amended, and shall be restricted as to their resale for a period of at least one hundred eighty (180) days from the date the Asset Purchase Agreement is executed.

The Earnout Shares, if any, will be equal to the aggregate amount of (i) the “Common Stock Equivalent A”, defined below, for every $1.00 in annualized first quarter revenue for the first (1st) quarter of 2007 derived from the operations to be transferred from Surgica to the Company (the “Annualized First Quarter Revenue”) up to, and including, $2,000,000.00 plus (ii) the “Common Stock Equivalent B”, defined below, for every $1.00 in Annualized First Quarter Revenue in excess of $2,000,000.00. Common Stock Equivalent A means the number of shares of the Company’s Common Stock equal to the quotient of (i) $0.50 divided by (ii)  Trailing Average Price. Common Stock Equivalent B means the number of shares of the Company’s Common Stock equal to the quotient of (i) $1.00 divided by (ii) the Trailing Average Price. The Earnout Shares will be issued, if at all, only if the average sales per quarter from the operations to be transferred from Surgica to the Company for the first (1st) and second (2nd) quarters of 2007 are equal to or greater than a predetermined set amount.

Each of the Option Agreement, License Agreement, Supply and Services Agreement and Asset Purchase Agreement contain representations and warranties by the Company and Surgica customary for transactions of this type.

On December 20, 2005, the Company issued a press release, in the form attached to this Current Report on Form 8-K as Exhibit 99.1, that describes the above-mentioned arrangements.

Surgica Arrangements with Financial Advisor

As previously disclosed in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 14, 2005, Edward G. Cape resigned from the Board of Directors of the Company on December 8, 2005.

Mr. Cape is a principal of the Sapphire Group LLC ("Sapphire"). Sapphire previously entered into advisory arrangements with Surgica. Surgica has advised the Company that such arrangements lapsed in accordance with their terms. Surgica has advised the Company that Sapphire has nevertheless claimed a fee in connection with transactions described herein. The Company has agreed, under certain circumstances, to indemnify Surgica for claims made against Surgica by Sapphire. Mr. Cape advised the Company that his resignation from the Board of Directors of the Company was in no way related to any disagreement with the Company on any matter relating to the Company's operations, policies or practices or to Sapphire's arrangements with Surgica. At all times that Mr. Cape served on the Board of Directors of the Company, he abstained from any vote on any matter with respect to transactions between the Company and Surgica.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

10.2	License Agreement, dated as of December 19, 2005, between Protein Polymer Technologies, Inc. and Surgica Corporation.
10.3	Supply and Services Agreement, dated as of December 19, 2005, between Protein Polymer Technologies, Inc. and Surgica Corporation.
10.4	Voting Agreement, dated as of November 23, 2005, between Protein Polymer Technologies, Inc. and Louis R. Matson.
10.5	Irrevocable Proxy, dated as of November 23, 2005, executed by Louis R. Matson in favor of Protein Polymer Technologies, Inc.
99.1	Press Release of Protein Polymer Technologies, Inc. dated as of December 20, 2005.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation
Date: December 22, 2005	By: /s/ J. Thomas Parmeter________________________ J. Thomas Parmeter Chairman of the Board

EXHIBIT INDEX

Exhibit No.     Description

10.2	License Agreement, dated as of December 19, 2005, between Protein Polymer Technologies, Inc. and Surgica Corporation.
10.3	Supply and Services Agreement, dated as of December 19, 2005, between Protein Polymer Technologies, Inc. and Surgica Corporation.
10.4	Voting Agreement, dated as of November 23, 2005, between Protein Polymer Technologies, Inc. and Louis R. Matson.
10.5	Irrevocable Proxy, dated as of November 23, 2005, executed by Louis R. Matson in favor of Protein Polymer Technologies, Inc.
99.1	Press Release of Protein Polymer Technologies, Inc. dated as of December 20, 2005.

EX-10

                                                                    Exhibit 10.2

                                                                  EXECUTION COPY

                                LICENSE AGREEMENT


         This Agreement entered into and effective as of December 19, 2005 (the
"Effective Date") is between PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware
corporation (hereinafter referred to as "Company"), and SURGICA CORPORATION, a
Delaware corporation (hereinafter referred to as "Licensor"). Company and
Licensor are each hereinafter referred to as a "Party" and collectively as the
"Parties".


                              W I T N E S S E T H:

         WHEREAS, the Licensor and Company entered into an Asset Purchase Option
Agreement, dated as of November 23, 2005 (the "Option Agreement"), pursuant to
which Company, among other things, obtained the right to purchase from Licensor
substantially all of the assets of Licensor then existing or thereafter acquired
through the date of the exercise of the Option (as that term is defined in the
Option Agreement);

         WHEREAS, as partial consideration offered by Licensor to induce Company
to enter into the Option Agreement, Licensor desires to grant to Company, and
Company desires to obtain from Licensor, an exclusive license to Licensor's
intellectual property rights; and

         WHEREAS, in connection with the Option Agreement and this Agreement,
the Parties are entering into a separate Supply Agreement (defined below),
pursuant to which Licensor shall supply to Company certain manufactured Product,
services and cooperation and Company shall provide to Licensor certain services
and cooperation.

         NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein set forth and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parties hereto
hereby agree as follows:

1.       DEFINITIONS.
         -----------

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

                  "Affiliate" shall mean, in relation to either Party, (a) any
         corporation, partnership, limited liability company, or other entity
         ("Entity") in which the relevant Party directly or indirectly holds 50%
         or more of the voting interests, (b) any Entity which holds directly or
         indirectly 50% or more of the voting stock or shares of the relevant
         Party, (c) any other Entity in which 50% or more of the voting
         interests is directly or indirectly held by any Entity described in
         clause (b), or (d) any Entity in which the relevant Party directly or
         indirectly holds less than 50% of the voting interests but has
         management control of such Entity in that it has the ability to appoint
         or remove the majority of the directors or managers of such Entity. For
         the purpose of this definition, Licensor shall not be an Affiliate of
         Company, and Company shall not be an Affiliate of Licensor.





                  "Assumed Liability Matters" shall mean those specified
         liabilities of the Licensor set forth in Schedule B.

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

                  "Copyrights" shall mean all copyright and rights in the nature
         of copyright now or subsequently owned or controlled by Licensor or its
         Subsidiaries at any time prior to or during the term of this Agreement
         relating to or embodying any part of the Know-How, including without
         limitation any materials consisting of or containing software or
         databases.

                  "Cost of Goods Sold" shall mean, for any applicable period,
         Company's cost of goods for Products sold determined in accordance with
         generally accepted accounting principles, consistently applied.

                  "ECA" means the European Competent Authorities, any Notified
         Bodies, or any successor agencies responsible for European Regulatory
         Approvals.

                  "FDA" shall mean the United States Food and Drug
         Administration or any successor agency vested with administrative and
         regulatory authority to approve testing and commercial distribution of
         products for human and veterinary use in the United States.

                  "Field" shall mean any and all human or veterinary
         applications.

                  "Fully-Burdened Cost" shall mean all of the direct and
         proportional indirect costs and expenses for providing the specified
         Product or services, including but not limited to raw materials and
         supplies, labor, equipment, utilities, facilities and overhead as
         determined according to generally accepted accounting principles (GAAP)
         consistently applied.

                  "Governmental Body" means any: (a) nation, principality,
         state, commonwealth, province, territory, county, municipality,
         district or other jurisdiction of any nature; (b) federal, state,
         local, municipal, foreign or other government; (c) governmental or
         quasi-governmental authority of any nature (including any governmental
         division, subdivision, department, agency, bureau, branch, office,
         commission, council, board, instrumentality, officer, official,
         representative, organization, unit, body or Entity and any court or
         other tribunal); (d) multi-national organization or body; or (e)
         individual, entity or body exercising, or entitled to exercise, any
         executive, legislative, judicial, administrative, regulatory, police,
         military or taxing authority or power of any nature.

                                       2





                  "Gross Margin" shall mean, for a Product, the invoiced price
         of such Product upon the sale by Company or any Affiliate of the
         Company to another entity, less the Cost of Goods Sold of such Product
         for the applicable accounting period.

                  "Intellectual Property" shall mean all Patents, Know-How,
         Trademarks and Copyrights.

                  "Know-How" shall mean all trade secrets, inventions, methods,
         processes, know-how and negative know-how, techniques, products,
         designs, cultures, other biological materials and other materials and
         compositions, information, data or experience whether patentable or
         not, useful in the Field that are (i) owned or controlled by Licensor
         or its Subsidiaries as of the Effective Date or (ii) developed,
         acquired or that otherwise become controlled by Licensor or its
         Subsidiaries at any time during the term of this Agreement, including
         without limitation, processes, techniques, methods, operating
         instructions, machinery designs, raw material or product
         specifications, drawings, blue prints, laboratory books, notes, records
         and any other technical and commercial information relating to
         research, design, development, manufacture, assembly, use or sale of
         the Products in the Field.

                  "Know How Documentation" shall mean complete and accurate
         written documentation concerning all Confidential Information of
         Licensor necessary or desirable to use, practice and/or otherwise
         exploit the Know-How and related Intellectual Property, including but
         not limited to the Device Master Record, Device History Record, Design
         History File, and Quality System Record (as those terms are defined in
         21 CFR 820, Quality System Regulation) for each of PVA Plus(TM),
         MaxiStat(TM), and MicroStat(TM) (510(k) clearance numbers K001678,
         K020033, and K032619, respectively), the 510(k) submissions as
         supplemented or amended resulting in such clearances, internal audit
         reports, reports and communications associated with an inspection or
         audit of Licensor's operations by a Governmental Body, and laboratory
         notebooks, experimental reports, batch records, invention disclosures,
         and patent applications.

                  "Net Profit" shall mean Net Sales less (i) the amount paid by
         Company for goods pertaining to the Products sold by Company that are
         obtained by Company pursuant to the Supply Agreement or other similar
         arrangement, (ii) other monies paid to Licensor by Company under the
         Supply Agreement, and (iii) Company's Fully Burdened Cost in providing
         the services and cooperation to Licensor as set forth in the Supply
         Agreement and/or the applicable Project Plan (as that term is defined
         in the Supply Agreement).

                  "Net Sales" shall mean the gross invoice price of Products
         sold by Company to any other entities, less (i) quantity and/or cash
         discounts actually allowed or taken; (ii) freight, postage and
         insurance; (iii) amounts repaid or credited by reasons of rejections or
         return of goods or because of retroactive price reductions specifically
         identifiable to Products; (iv) amounts payable resulting from
         governmental (or agency thereof) mandated rebate programs; (v)
         third-party rebates to the extent actually allowed; (vi) custom duties
         and taxes (excluding income, value-added and similar taxes), if any,
         directly related to the sale; and (vii) any other specifically
         identifiable amounts included

                                       3





         in such Product gross sales that will be credited for reasons
         substantially equivalent to those listed hereinabove.

                  "Patent(s)" shall mean:

                       (a) any and all patents and applications for patents
                  owned or controlled by Licensor as of the Effective Date which
                  are useful in the Field including, but not limited to, those
                  that are identified in Schedule A, attached hereto, along with
                  any and all foreign counterparts thereof, all continuations,
                  continuations-in-part, divisions and renewals thereof, all
                  patent supplementary protection certificates and similar
                  rights that are based on or derive priority from any of the
                  foregoing or which may be granted thereon, and all reissues,
                  re-examinations, extensions, patents of addition and patent of
                  importation thereof;

                       (b) any and all patent applications by Licensor or its
                  Subsidiaries useful in the Field that are filed, acquired or
                  that otherwise become controlled by Licensor during the term
                  of this Agreement, all continuations, continuations-in-part or
                  divisions of any such applications, any patents which shall
                  issue based on such applications, continuations,
                  continuations-in-part, or divisions and any and all patents,
                  patent supplementary protection certificates and similar
                  rights that are based upon or derive priority from any of the
                  foregoing or which may be granted thereon and all reissues,
                  renewals or extensions thereof or patents of addition thereto;
                  and

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

                  "Product(s)" shall mean any product which (i) if made, used or
         sold would infringe one or more Valid Claims in an issued Patent but
         for the License granted pursuant to Section 3.1 of this Agreement, or
         (ii) otherwise uses, incorporates or was conceived, developed or
         reduced to practice using the Patents or Know-How that comprise, in
         part, the Intellectual Property subject to the License set forth in
         Section 3.1 hereof.

                  "Regulatory Agency" means (a) the FDA, (b) the ECA, or (c) any
         other Governmental Body with regulatory authority similar to the FDA or
         ECA in any other jurisdiction anywhere in the world.

                  "Regulatory Approval" shall mean with respect to any country,
         filing for and receipt of all regulatory agency or other registrations,
         clearances and approvals required in such country in respect of Product
         for any purpose specified in this Agreement or, if no purpose is
         specified, to enable Product to be manufactured, offered for sale, sold
         and distributed, and for Non-Clinical Use or Clinical Use to take
         place, in such country.

                  "Subsidiary" shall mean a corporation, limited liability
         company or partnership of which a Party holds 50% or more of the voting
         or economic interest. For the purpose of this definition, Licensor
         shall not be a Subsidiary of Company.

                                       4





                  "Supply Agreement" shall mean that certain Supply and Services
         Agreement entered into between Licensor and Company of even date
         herewith.

                  "Third Party" shall mean a person other than Licensor, Company
         or their respective Affiliates.

                  "Trademarks" shall mean any and all trademarks, trade names,
         service marks, service names, logos and similar proprietary right
         owned, controlled or licensed by Licensor to be used in connection with
         the Licensor's Intellectual Property or Products.

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

2.       CONDITIONS TO LICENSE.
         ---------------------

         2.1   Licensor hereby represents and warrants that, as a condition
precedent to entering into this Agreement, Licensor has:

               (a) Successfully obtained Angiodynamics, Inc.'s ("Angiodynamics")
written consent, the form of which is attached as Exhibit D to the Option
Agreement, to the assignment to Company of all of Licensor's rights and
obligations under the Distributor Agreement dated June 28, 2002 by and between
Licensor and Angiodynamics; and

               (b) Received an unconditional and irrevocable assignment of all
rights, title and interest of its employees, officers and/or directors
(including, without limitation, Louis R. Matson) in and to all inventions
pertaining or applicable to the Field.

3.       ASSIGNMENT OF 510(K) CLEARANCES; GRANT OF LICENSE.
         -------------------------------------------------

         3.1   Rights Granted.
               --------------

               (a) Subject to the terms and conditions of this Agreement
(including, without limitation, Company's payment of the License Fee), Licensor
hereby sells, assigns, transfers, conveys, grants, and delivers and Company
hereby accepts from Licensor all of Licensor's right, title and interest in and
to its 510(k) Clearances, including numbers: K001678 relating to PVA Plus(TM),
K020033 relating to MaxiStat(TM) and K032619 relating to MicroStat(TM), filed
with the United States Food and Drug Administration and all information
submitted along with such applications ("510(k) Clearances").

               (b) Upon execution and delivery of this Agreement, Licensor shall
effectuate the sale, assignment, transfer, conveyance, grant and delivery of the
510(k) Clearances to Company by delivering to Company (or its designees) a duly
executed bill of sale and assignment for the 510(k) Clearances in substantially
the form of Exhibit A, attached hereto, and shall notify the FDA of the same by
delivering to Company (or its designees) a duly executed letter of notification
in substantially the form of Exhibit B, attached hereto.

                                       5





               (c) Subject to the terms and conditions of this Agreement
(including, without limitation, Company's payment of the License Fee), Licensor
hereby grants to Company and Company hereby accepts from Licensor an exclusive
(even as against Licensor), worldwide license, with the right to sublicense, to
the Intellectual Property to make, have made, modify, import, use, offer to
sell, sell and have sold Products and perform and have performed all processes
under the Intellectual Property, solely in the Field in all countries in the
world (the "License").

               (d) Solely with respect to the License of Trademarks set forth
herein, (i) Company may utilize and exploit such Trademarks only in connection
with the Products, (ii) Licensor may from time to time request samples of
Company's use of the Trademarks in commerce, and (iii) Company shall comply with
the reasonable written use standards and requirements imposed by Licensor
concerning the use of its Licensor's Trademarks.

               (e) Licensor hereby agrees that it shall not, without the prior
written consent of Company, use, make, have made, modify, import, use, perform,
offer to sell, sell or have sold any products, compositions or methods in the
Field, or license or transfer to any Third Party (including without limitation,
any Affiliate) any of such rights in the Field.

               (f) With respect to any Intellectual Property developed or
acquired by Licensor after the Effective Date, Company agrees that the License
with respect to such after-acquired Intellectual Property shall be subject to
any contractual obligations of Licensor under bona fide arm's length third party
agreements; provided that, in the event the License is restricted or limited by
any such contractual obligations of Licensor, then Licensor shall use reasonable
commercial efforts to exclude or, where applicable, to minimize any such
restriction or limitation.

               (g) Licensor acknowledges and agrees that the License set forth
in Section 3.1 above, includes, without limitation, a license to make, have
made, modify, import, use, offer to sell, sell and have sold any and all of
Licensor's Products that have received, or during the term of this Agreement
will receive, Regulatory Approval from any applicable Regulatory Agency.

               (h) To the extent permissible under the terms of any and all
marketing and/or distribution agreements in effect as of the Effective Date, or
in effect during the term of this Agreement, Licensor shall sublicense all of
its rights under such agreements to Company for the duration of this Agreement.
To the extent that such a sublicense requires the consent of the other
contractual party, Licensor shall reasonably cooperate with Company to obtain
such consent.

4.       TRANSFER OF LICENSED TECHNOLOGY.
         -------------------------------

         No later than ten (10) days after the Effective  Date,  Licensor  shall
provide to Company a copy of the current Device Master Record and Quality System
Record for each of PVA Plus(TM), MaxiStat(TM), and MicroStat(TM),  together with
a copy  of the  submissions  as  amended  or  supplemented  resulting  in  their
respective  510(k)  clearances.  Thereafter,  Licensor  shall  provide  Know How
Documentation as requested in writing by Company within ten (10) days.

                                       6





5.       PAYMENT TO LICENSOR.
         -------------------

5.1      License Fee; Indemnification Against Certain Claims.
         ---------------------------------------------------

               (a) Upon execution and delivery of this Agreement and no later
than five (5) calendar days after the Effective Date, Licensor shall provide
Company written, complete and accurate records specifying Licensor's total debt
concerning the categories set forth in Schedule C, attached hereto.

               (b) Promptly upon Company receipt and diligent review of
Licensor's records concerning its outstanding debts, Company shall deliver to
Licensor, or to Licensor's designee(s), the "License Fee" in full satisfaction
of its license fee obligations hereunder, which shall consist of (i) the
assumption of "Assumed Liability Matters" by the Company as of the Effective
Date as set forth in Schedule B and (ii) an aggregate amount of up to Three
Hundred and Ninety One Thousand and Zero Cents ($391,000.00) as set forth in
Schedule C, to satisfy Licensor's outstanding debts and/or liabilities.

               (c) Company's License Fee obligations shall consist of assuming
and repaying Company's outstanding debt as provided in Section 5.1(b) above as
of the Effective Date in an aggregate amount not to exceed the amount specified
in Section 5.1(b). Company agrees to take all commercially reasonable steps
necessary to assume, pay, perform and discharge when due, all of Company's
outstanding debt as provided in Section 5.1(b) as of the Effective Date in an
aggregate amount not to exceed the amount specified in Section 5.1(b)

               (d) Company shall indemnify, hold harmless and defend Licensor
from and against and will pay or reimburse Licensor with respect to any and all
claims by Sapphire Group LLC against Licensor to which Licensor may become
subject, directly arising out of or in connection with any fees found by a court
of competent jurisdiction to be actually owed by Licensor to Sapphire Group LLC
arising solely pursuant to that certain engagement letter signed by Sapphire
Group LLC and agreed to by Licensor, dated as of July 7, 2003, as amended
pursuant to that amendment letter signed by Sapphire Group LLC and agreed to by
Licensor, dated as of July 6, 2004, and as supplemented by that supplement
letter signed by Sapphire Group LLC and agreed to by Licensor, dated as of June
3, 2005, solely in connection with Licensor entering into and executing the
Option Agreement, the License Agreement and/or the Asset Purchase Agreement, as
to each, if and when entered into and executed by Licensor and Company (a
"Sapphire Claim"). Notwithstanding the foregoing, the Licensor's right to
defense of such claims as set forth in this Section 5.1(d) shall not be
dependent upon any finding by any court of competent jurisdiction with respect
to any such Sapphire Claim. All Sapphire Claims shall be resolved pursuant to
those procedures set forth in Section 7.3. In no event, shall Company's total
liability pursuant to this Section 5.1(d) exceed Two Hundred Thousand Dollars
and Zero Cents ($200,000.00), such total liability shall not be reduced by any
reasonable attorneys' fees incurred by Company in defense of Licensor to any
such Sapphire Claim as provided herein.

5.2      Royalties.
         ---------

                                       7





               (a) Subject to the provisions of this Agreement, Company shall
pay Licensor, no later than forty-five (45) days after the close of each
Calendar Quarter throughout the term of this Agreement, a royalty equal to
twenty-five (25%) of Company's Net Profit from Products for the Calendar Quarter
(or part thereof in the case of the first or last Calendar Quarter for which a
royalty is payable if not a full quarter) then ended (the "Surgica Royalty").

               (b) In the event any Product or Products are sold pursuant to a
sales agreement, marketing agreement, distribution agreement or similar
arrangement to which the Company is a party with any entity ("Net Distributor
Revenue"), Company shall pay Licensor, no later than forty-five (45) days after
the close of each Calendar Quarter, the royalty specified in Section 5.2(a) as
applied to the Company's share or interest in the Product or Product-related
revenue from said entity's sale of Products; provided, however, that in no case
shall Company have any obligation to pay any amounts to Licensor under this
Section 5.2(b) for the sale of Products by Company to any other entities.

               (c) Company shall deliver to Licensor written reports of Net
Profit, Net Sales and Net Distributor Revenue during the preceding Calendar
Quarter on or before the forty-fifth (45th) day following the end of each
Calendar Quarter. Such reports shall include a calculation of the earned royalty
due and shall be accompanied by the monies due. If no earned royalties are due,
then Company shall indicate such on its written report.

6.       CONFIDENTIALITY.
         ---------------

         6.1   Subject to Section 6.3, during the term of this Agreement and for
a period of five (5) years thereafter (except with respect to trade secrets, for
which the obligations of non-use and non-disclosure shall continue for so long
as such trade secrets are protected by their owner as trade secrets), each Party
shall maintain in confidence and shall not disclose to any Third Party any
know-how, trade secrets, business or technical information or other information
("Confidential Information") received from the other Party relating to any
Product, and shall not use the other Party's Confidential Information except for
the purposes of this Agreement without the prior written consent of such other
Party. These confidentiality and non-use obligations shall not apply to any
Confidential Information that the receiving Party can demonstrate:

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

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

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

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

                                       8





         6.2   During the term of this Agreement, each Party shall take all
reasonable steps to:

               (a) prevent any disclosure in breach of Section 6.1 of
Confidential Information of the other which would be materially prejudicial to
the interests of the other Party;

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

               (c) ensure that the persons referred to in Section 6.2(b) enter
into appropriate confidentiality agreements containing use and disclosure
restrictions at least as restrictive as those set forth herein.

         6.3   Notwithstanding the foregoing provisions of this Section, the
Parties and their Affiliates, distributors and sublicensees shall be entitled to
disclose Confidential Information of the other Party which would otherwise be
protected by the provisions of Section 6.1 to actual or potential customers for
any Product in so far as such disclosure is reasonably necessary to
commercialize such Product.

7.       INDEMNIFICATION.
         ---------------

         7.1   Company Indemnification. Except as otherwise provided in this
Agreement, Company shall indemnify and hold harmless, pursuant to the provisions
of this Section 7, Licensor and each of its officers, directors, employees,
agents and Affiliates (collectively, the "Licensor Indemnitees"), from and
against, and will reimburse each such Licensor Indemnitee with respect to, any
and all Third Party claims, actions, demands, losses, damages, liabilities,
costs and expenses to which such Licensor Indemnitee may become subject,
including reasonable fees and disbursements of counsel and expenses of
reasonable investigation (collectively, "Licensor Losses"), arising out of,
based upon or caused by: (a) the inaccuracy of any representation or the breach
of any warranty, covenant or agreement of Company contained in this Agreement,
the Supply Agreement or the Option Agreement; (b) any failure by Company to
conduct its obligations arising hereunder in a diligent and professional manner
and in accordance with all applicable laws and regulations; or (c) any gross
negligence or intentional wrongdoing by Company in the performance of its
obligations (except in each case, and solely to the extent, that any Licensor
Loss is due to (x) the gross negligence or willful misconduct of one or more
Licensor Indemnitees); provided, however, that, in each case, Company shall not
be obligated to indemnify the Licensor Indemnitees for claims arising out of any
Product's infringement of any intellectual property right of a Third Party
unless such claim results from Company's (i) misuse or mishandling of the
Product or (ii) unauthorized modification of the Product.

         7.2   Licensor Indemnification. Licensor shall indemnify and hold
harmless, pursuant to the provisions of this Section 7, Company and each of its
officers, directors, employees, agents and Affiliates (collectively, the
"Company Indemnitees"), from and against, and will reimburse each such Company
Indemnitee with respect to, any and all Third Party claims, actions, demands,
losses, damages, liabilities, costs and expenses to which such Company
Indemnitee may become subject, including reasonable fees and disbursements of

                                       9





counsel and expenses of reasonable investigation (collectively, "Company
Losses"), arising out of, based upon or caused by: (a) the inaccuracy of any
representation or the breach of any warranty, covenant or agreement of Licensor
contained in this Agreement, the Supply Agreement or the Option Agreement; (b)
the manufacture or supply of Products; (c) any failure by Licensor to conduct
its obligations arising hereunder in a diligent and professional manner and in
accordance with all applicable laws and regulations; or (d) any gross negligence
or intentional wrongdoing by Licensor in the performance of its obligations
(except in each case, and solely to the extent, that any Company Loss is due to
the gross negligence or willful misconduct of one or more Company Indemnitees);
provided, however, that Licensor shall not be obligated to indemnify the Company
Indemnitees for claims arising out of any Product's infringement of any
intellectual property right of a Third Party resulting from such Company
Indemnitee's: (i) misuse or mishandling of the Product or (ii) unauthorized
modification of the Product.

         7.3   Indemnification Procedures. Each Party, on behalf of itself and
its respective Licensor Indemnitees or Company Indemnitees (each such Person, an
"Indemnitee"), agrees to provide the indemnifying Party prompt written notice of
any action, claim, demand, discovery of fact, proceeding or suit (collectively,
a "Claim") for which such Indemnitee intends to assert a right to
indemnification under this Agreement; provided, however, that failure to give
such notification shall not affect each applicable Indemnitee's entitlement to
indemnification (or the corresponding indemnifying Party's indemnification
obligations) hereunder except to the extent that the indemnifying Party shall
have been prejudiced as a result of such failure. The indemnifying Party shall
have the initial right (but not obligation) to defend, settle or otherwise
dispose of any Claim for which an Indemnitee intends to assert a right to
indemnification under this Agreement as contemplated in the preceding sentence
if, and for so long as, the indemnifying Party has recognized in a written
notice to the Indemnitee provided within thirty (30) days of such written notice
its obligation to indemnify the Indemnitee for any Licensor Losses or Company
Losses (as the case may be) relating to such Claim; provided, however, that if
the indemnifying Party assumes control of the defense, settlement or disposition
of a Claim, the indemnifying Party shall obtain the written consent of each
applicable Indemnitee prior to ceasing to defend, settling or otherwise
disposing of the Claim. If the indemnifying Party fails to state in a written
notice during such thirty (30) day period its willingness to assume the defense
of such a Claim, the Licensor Indemnitee(s) or Company Indemnitee(s), as the
case may be, shall have the right to defend, settle or otherwise dispose of such
Claim, subject to the applicable provides of Sections 7.1 and 7.2.

8.       LIMITED LIABILITY. EXCEPT WITH RESPECT TO EACH PARTY'S INDEMNIFICATION
AND CONFIDENTIALITY OBLIGATIONS (SET FORTH IN SECTIONS 6 AND 7), NOTWITHSTANDING
ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY SHALL BE LIABLE OR
OBLIGATED UNDER ANY SECTION OF THIS AGREEMENT OR UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY SPECIAL, EXEMPLARY,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

                                       10





9.       OWNERSHIP.
         ---------

         9.1   Ownership of Inventions.
               -----------------------

               (a) As between the Parties, all right, title and interest to any
inventions or discoveries ("Inventions") made by Company employees or agents
with or without inventive contribution by Licensor employees or agents and
conceived or first reduced to practice under this Agreement or the Supply
Agreement shall belong to Company. As between the Parties, all right, title and
interest to any Inventions made by Licensor employees or agents without
inventive contribution by Company employees or agents and conceived or first
reduced to practice under the Supply Agreement ("Licensor Inventions") shall
belong to Licensor pending the successful exercise of the Option pursuant to the
Option Agreement at which such time such Licensor Inventions, to the extent
applicable to the Field, shall be included in the purchased assets. All right,
title and interest in and to any Inventions made jointly by employees or agents
of Licensor and Company shall belong exclusively to Company; provided, however,
that Licensor shall, and hereby does, receive a nonexclusive, royalty-free,
fully paid-up, non-transferable license (without the right to sublicense) to use
such Inventions in the fulfillment of its obligations under the Supply
Agreement.

               (b) Licensor hereby grants and agrees to grant to Company a
nonexclusive, transferable, royalty-free, fully paid-up, irrevocable, worldwide
right and license (with right to sublicense) to the Licensor Inventions solely
for applications within the Field.

               (c) Each Party hereby makes any assignments necessary to
accomplish the foregoing ownership provisions. Each Party agrees that from time
to time such Party shall promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable
in order to execute, confirm, memorialize or otherwise document the assignments
and ownership rights described herein.

         9.2   Records. Each Party shall require its employees or agents
responsible for conducting research in performance of this Agreement to keep
contemporaneous records of their results and findings in sufficient detail to
document any inventions of discoveries made by such employees and agents under
this Agreement in bound notebooks (that shall be reviewed and signed by a
witness on a regular basis). Except with respect to records pertaining
exclusively to Licensor Inventions, all such records shall be the exclusive
property of Company; provided, however, that Licensor may retain for its files a
copy of records concerning Inventions made with inventive contribution of
Licensor.

10.      TERM AND TERMINATION.
         --------------------

         10.1  Term.
               ----

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

                                       11





               (b) Notwithstanding the foregoing Section 10.1(a), if Company
exercises the Option (as defined in, and pursuant to, the Option Agreement),
this Agreement shall automatically terminate upon the effective assignment to
Company of the purchased assets (including, without limitation, the Intellectual
Property) pursuant to the terms of the Option Agreement and the Asset Purchase
Agreement attached thereto.

               (c) Notwithstanding the foregoing Section 10.1(a), if Company
does not exercise the Option (as defined in, and pursuant to, the Option
Agreement) for any reason whatsoever except as a result of (i) a default by
Licensor under this Agreement, which is not cured within forty-five (45) days of
notice of such default as provided in Section 10.2(b) below, or (ii) the failure
of Licensor to satisfy all of the closing conditions for which it is responsible
as set forth in Article 6 of the Asset Purchase Agreement, upon request of
Licensor, each Party hereto shall agree to negotiate in good faith with the
other Party the reconveyance of the License to the Licensor and the termination
of this Agreement.

         10.2  Rights of Termination.
               ---------------------

               (a) Company's Right of Termination. Company may terminate this
Agreement at any time, with respect to one or more of the Products or Patents by
giving at least thirty (30) days' prior written notice to Licensor.

               (b) Licensor's Right of Termination. If Company breaches any of
its obligations set forth in Section 5, and such breach is not cured within
forty-five (45) days after Licensor provides Company with written notice of such
breach, Licensor may terminate this Agreement.

               (c) Material Breach. Except as set forth in Section 10.2(b),
Licensor and Company shall have the right to terminate this Agreement, including
the licenses granted herein, in the event that any material term or condition of
this Agreement is breached by the other Party, and such breach is not remedied
within a period of thirty (30) days after the non-breaching Party transmits
written notice of such breach. If such material breach is corrected within the
applicable thirty (30) day period, this Agreement and the rights granted
hereunder shall continue in full force and effect.

         10.3  Termination For Cause. Any termination pursuant to Sections
10.2(b) or 10.2(c) shall be deemed a termination for "Cause".

         10.4  Effect of Termination.
               ---------------------

               (a) Except if this Agreement is terminated by Company pursuant to
Section 10.2(a), or for Cause by Licensor, all rights licensed to Company
hereunder shall become irrevocable and fully-paid upon payment of any amounts
due that have accrued hereunder prior to effective date of such termination, and
thereafter Company shall have, except (1) in such countries where restricted by
applicable law or (2) (i) for all Intellectual Property that Licensor does not
own but licenses from a Third Party or (ii) to which it does not have a
royalty-free license (as licensee), an irrevocable, fully paid-up license, with
the right to sublicense, under the Intellectual Property licensed pursuant to
Sections 2 and 8 hereof, to make, have made, use, sell, offer to sell and import
Products. For licenses that are not royalty free, Licensor shall use its best

                                       12





efforts to obtain for Company the rights of Licensor under such licenses,
provided that Company agrees to pay and pays on a going forward basis, any
payments to Third Parties required under any such license.

               (b) If this Agreement is terminated by Company for Cause or as a
result of the successful exercise of the Option pursuant to the Option Agreement
as described in Section 10.1(b), all rights licensed hereunder to Licensor
pursuant to Section 9.1(a) shall become irrevocable and fully-paid, and
thereafter Licensor shall have, except (1) in such countries where restricted by
applicable law or (2) (i) for all intellectual property that Company does not
own but licenses from a Third Party or (ii) to which it does not have a
royalty-free license (as licensee), an irrevocable, fully paid-up, non-exclusive
license to make, have made, use, sell offer to sell, and import Product.

               (c) If this Agreement is terminated prior to the expiration of
its term, except with respect to termination resulting from Licensor's breach of
the Agreement, effective on such termination date, Company shall assign the
510(k) Clearances back to Licensor.

         10.5  Sublicensees. In the event this Agreement terminates for any
reason, each of Company's sublicensees at such time shall continue to have the
rights and license set forth in their sublicense agreements; provided, however,
that such sublicensee agrees in writing that Licensor is entitled to enforce all
relevant terms and conditions of such sublicense agreement directly against such
sublicensee.

         10.6  Survival. All provisions of this Agreement which in order to give
effect to their meaning need to survive its termination or expiration shall
remain in full force and effect thereafter, including without limitation
Sections 1, 6-9, 10.4, 113-17, and 19-26. All then-outstanding payment and
reimbursement obligations shall survive any termination or expiration of this
Agreement.

11.      PATENTS.
         -------

         11.1  As between the Parties hereto, all obligations concerning the
prosecution and maintenance of patents shall be governed by Section 3.3 of the
Supply Agreement.

12.      INFRINGEMENT.
         ------------

         12.1

               (a) If a Third Party asserts that a patent or other right owned
by it is infringed by the manufacture, import, marketing, use, sale, offer for
sale and/or supply of any Product, the Party first obtaining knowledge of such
claim shall promptly provide the other Party written notice of such claim and
the related facts in reasonable detail. Notwithstanding any provision in this
Agreement to the contrary, except subject to indemnification obligations of
Licensor, the defense of any such claim (including without limitation, the
institution and prosecution of any counterclaims thereto) shall be controlled by
Company. However, nothing in this Section 12.1 will prevent Licensor from
engaging its own counsel in any such matter if there shall exist a bona fide
conflict between the rights and interest of Licensor and Company.

                                       13





               (b) Without its prior written consent, Licensor will not be
responsible for or bound by any compromise made by Company. Without its prior
written consent, Company will not be responsible for or bound by any compromise
made by Licensor.

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

         12.2

               (a) In the event that there is infringement or misappropriation
of any Intellectual Property by a Third Party, Licensor and Company shall notify
each other in writing to that effect immediately upon becoming aware of the
same, including if practicable with said written notice evidence establishing a
case of infringement or misappropriation by such Third Party.

               (b) Company shall have the right, in its sole discretion, but not
the obligation to bring an infringement or misappropriation suit(s) against one
or more Third Parties at its own expense and in its own name, if possible, or
jointly in its name and in the name of Licensor or if necessary in Licensor's
sole name if such infringement involves the use of Intellectual Property in the
Field.

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

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

13. ARBITRATION OF DISPUTES.
    -----------------------

         13.1  Excepting only actions and claims relating to actions commenced
by a Third Party against Licensor or Company (including, without limitation, for
injuries caused by a Product or in respect to a trademark or patent infringement
claim), any controversy or claim arising out of or relating to the terms and
conditions of this Agreement, or the decision to agree upon these terms, or the
breach thereof, including questions of validity, infringement, or termination
hereof, shall be settled exclusively by arbitration in accordance with the rules
of the American Arbitration Association. If such controversy or claim relates to
patent validity or infringement, then the Patent Arbitration Rules of the AAA
shall apply; otherwise the International Arbitration Rules of the AAA shall
apply. Notwithstanding the foregoing to the contrary or in the arbitration rules
invoked or in this Section 13, the Parties retain the right to request a
judicial authority to invoke interim measures of protection, and such request
shall not be deemed incompatible with this agreement to arbitrate or a waiver of
the right to arbitrate.

                                       14





         13.2  There shall be one (1) arbitrator to be mutually agreed upon by
the Parties and to be selected from the Regional Panel of Distinguished
Neutrals. If the Parties are unable to agree upon such an arbitrator who is
willing to serve within ten (10) days of receipt of the demand by the other
Party, the Parties shall within three (3) days select one of the four largest
international public accounting firms (excluding those providing services to the
Parties) and engage the managing partner or senior officer of its County office
located in the county containing the principal place of business of the Party
who did not initiate the arbitration to designate a partner of such firm to
serve as the arbitrator. Failing that, then the AAA shall appoint an arbitrator
willing to serve from the Regional Panel of Distinguished Neutrals, or if no
such panel exists, then from an appropriate AAA panel. It shall be the duty of
the arbitrator to set dates for preparation and hearing of any dispute and to
expedite the resolution of such dispute.

         13.3

               (a) The arbitration shall be held in the city in which the
principal place of business of the Party who did not initiate the arbitration is
located and the arbitrator shall apply the substantive law of California except
that the interpretation and enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act.

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

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

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

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

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

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

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

               (i) Prompt handling and disposal of the issue is important.
Accordingly, the arbitrator is instructed to assume adequate managerial
initiative and control over discovery and other aspects of the proceeding to
schedule discovery and other activities for substantially continuous work,
thereby expediting the arbitration as much as is deemed reasonable to him, but

                                       15





in all events to effect a final award no later than 365 days after the
arbitrator's selection or appointment and no later than 20 days after the close
of evidence.

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

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

14.      NOTICES.
         -------

         14.1  Notices hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or when sent by facsimile or other
telegraphic means. Such notices shall be effective upon receipt, if by personal
delivery, or if by facsimile, on the date of the confirmation of "ok"
transmission. Addresses and persons to be notified may be changed by either
Party by giving written notice thereof to the other Party.

               For Licensor:

                      Surgica Corporation
                      5090 Robert J. Mathews Parkway #4
                      El Dorado Hills, CA 95762
                      Facsimile:  916.933.5260
                      Attention:  Louis R. Matson

                      with a copy to:

                      Bullivant Houser Bailey
                      1331 Garden Hwy, Suite 300
                      Sacramento, CA 95833
                      Facsimile:  916.442.3442
                      Email eric.stiff@bullivant.com
                      Attention:  Eric J. Stiff, Esq.

               For Company:

                      Protein Polymer Technologies, Inc.
                      10655 Sorrento Valley Road
                      San Diego, CA  92121
                      Facsimile:  858.558.6477
                      Email:   wnp@ppti.com; jtp@ppti.com
                      Attention:  William N. Plamondon, Chief Executive Officer
                      and J. Thomas Parmeter, Chairman

                                       16





                      with a copy to:

                      Paul, Hastings, Janofsky & Walker LLP
                      515 South Flower Street
                      Los Angeles, CA  90071-2228
                      Facsimile:  213.996.3254
                      Attention:  Robert A. Miller Jr., Esq.


15.      FORCE MAJEURE.
         -------------

         15.1

               (a) Subject to compliance with paragraph (b) of this Section 15.1
any delays in or failure of performance by either Party under this Agreement
shall not be considered a breach of this Agreement if and to the extent caused
by any occurrences beyond the reasonable control of the Party affected,
including but not limited to: acts of God; acts, regulations or laws of any
government; strikes or other concerted acts of workers; fires; floods;
explosions; riots; wars; rebellion; embargo; and sabotage; and any time for
performance hereunder shall be extended by the actual time of delay caused by
such occurrence

               (b) Any Party affected by such force majeure who wishes to rely
on the provisions of paragraph (a) of this Section shall as soon as reasonably
practicable give written notice to the other Party specifying the matters
constituting force majeure together with such evidence thereof as it can
reasonably give and specifying the period for which it is estimated that the
such delay will continue.

16.      SAVINGS PROVISION.
         -----------------

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

17.      RELATIONSHIP OF PARTIES.
         -----------------------

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

                                       17





18.      WARRANTIES.
         ----------

         18.1  Company warrants that it shall use its reasonable and diligent
efforts to comply with all laws applicable to the purchase, storage, transport,
labeling, distribution or commercialization by it of Products, shall comply with
the U.S. Export Administration laws and regulations and shall not export or
re-export any technical data or Intellectual Property, or the direct products of
such technical data or Intellectual Property, or Products to any prohibited
country listed in the U.S. Export Administration Regulations unless properly
authorized to do so by the U.S. government.

         18.2  Licensor represents and warrants to Company that the following
statements are true and accurate in all material respects as follows:

               (a) It has sufficient right and title to and ownership of, and is
sufficiently free and clear of all liens, claims and encumbrances of any nature
on, the Intellectual Property to grant to Company the various rights and
licenses granted to Company under this Agreement;

               (b) It has not done, will not do nor agree to do during the term
of this Agreement, any of the following things if to do so would be materially
inconsistent with the exercise by Company of the rights granted to it under this
Agreement, including assign, mortgage, hypothecate, or otherwise transfer any of
the Intellectual Property, including without limitation, the Patents, or any of
its rights or obligations under this Agreement;

               (c) Except for standard rights granted to the United States
government in connection with Small Business Innovation Research grants, no
Third Party owns any rights in the Intellectual Property that would adversely
affect any of the rights and licenses granted to Company under this Agreement;

               (d) No Third Party owns any rights which would be infringed by
the use of the Products or the exercise of Company rights under the License to
the Intellectual Property in accordance with provisions of this Agreement.

               (e) In the event Company consults with Licensor regarding future
intended uses of the Products, Licensor shall, in good faith, disclose to
Company any Third Party rights of which it is aware which might be infringed by
such uses of the Products.

               (f) It is duly authorized and empowered to enter into and perform
this Agreement; and the execution and performance of this Agreement by Licensor
does not and will not conflict with or violate any contract, agreement,
indenture, mortgage, instrument, writ, judgment, or order of any court, arbiter
or governmental or quasi-governmental body to which Licensor is a party or by
which Licensor is bound.

19.      INTEGRATION AND CONFLICT.
         ------------------------

         19.1

               (a) It is the mutual desire and intent of the Parties to provide
certainty as to their future rights and remedies against each other by defining
the extent of their mutual

                                       18





undertakings provided herein. This Agreement and the related Supply Agreement
and Option Agreement:

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

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

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

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

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

20.      GOVERNING LAW.
         -------------

         20.1  This Agreement shall be construed and the rights of the Parties
shall be determined in accordance with the substantive laws of the State of
California, without regard to its conflict of laws principles, except that the
Arbitration provisions contained herein shall be governed as stated in Section
13.

21.      ASSIGNMENT.
         ----------

         21.1  Licensor shall not assign or otherwise transfer this Agreement or
any part hereof (and any attempt to do so will be void) to any Third Party
without the prior written permission of Company, except to an entity that
acquires all or substantially all of such Party's assets or operations.

22.      BANKRUPTCY.
         ----------

         22.1  The Parties hereto acknowledge and agree that it is their mutual
intention and agreement that should Licensor become a debtor in case under title
11 of the United States Code (the "Bankruptcy Code"), then the Company shall be
entitled to all the benefits accorded a licensee under Bankruptcy Code Section
365(n). Furthermore, it is hereby acknowledged and agreed that this Agreement
shall be "such contract" as that phrase is used in Section 365(n) and that:

               (a) the Supply Agreement, any subsequent supply agreement which
may be entered into by the Parties, and any other agreement executed pursuant to
the Supply Agreement or in order to allow the Company to exploit the
Intellectual Property shall each be considered an "agreement supplementary to
such contract" as that phrase is used in said Section 365(n);

                                       19





               (b) upon rejection of this Agreement, the Company shall be deemed
to have requested of Licensor as debtor in possession (or of Licensor's trustee,
if any) that Licensor as debtor in possession or such trustee (i) immediately
provide and deliver to the Company or any Affiliate as the Company may
subsequently designate in writing, all embodiments of the Intellectual Property,
without further notice or seeking relief from the automatic stay or other leave
from any court; and (ii) not interfere with the rights of the Company, its
Affiliates, and/or any sublicensee under this Agreement, the Supply Agreement,
or any other agreement supplementary to the Supply Agreement, including any
right to obtain Intellectual Property or any embodiment of the Intellectual
Property from another entity; and

               (c) unless and until Licensor as debtor in possession or
Licensor's trustee (if any) rejects this agreement or any agreement
supplementary to this Agreement, then upon the written request of the Company,
and pursuant to Bankruptcy Code Section 365(n)(4), Licensor as debtor in
possession or Licensor's trustee (if any) shall: (i) at Company's option either
perform this Agreement, or provide and deliver to Company all embodiments of the
Intellectual Property, held by either Licensor as debtor in possession or
Licensor's trustee (if any); and (ii) not interfere with the rights of Company,
its Affiliates, and/or any sublicensee under this Agreement, the Supply
Agreement, or any other agreement supplementary to the Supply Agreement,
including any right to obtain rights to or embodiments of the Intellectual
Property, or any embodiment of the Intellectual Property from another entity.

23.      NONSOLICITATION.
         ---------------

         During  the term of this  Agreement,  neither  Party will  solicit  any
employee to leave the employ of the other;  the foregoing does not prohibit mass
media advertising or retained or contingency searches not specifically  directed
towards employees of a Party.

24.      PRESS RELEASES.
         --------------

         Except as required by law or as  expressly  set forth  herein,  neither
Party  shall  make any public  statement,  press  release or other  announcement
relating  to  the  terms  or  existence  of  this  Agreement,  or  the  business
relationship  of the  Parties,  without the prior  written  consent of the other
Party.

25.      AMENDMENTS AND WAIVERS.
         ----------------------

         No terms or provisions of this Agreement shall be varied or modified by
any prior,  contemporaneous or subsequent statement, conduct or act of either of
the  Parties,  whether  oral or written,  except that the Parties may amend this
Agreement by written  instrument  specifically  referring to this Agreement.  No
waiver of any right or remedy  hereunder shall be effective  unless in a writing
signed by the Party to be bound, nor shall any waiver in one instance constitute
a waiver of the same or any other right or remedy in any other instance.

26.      COUNTERPARTS.
         ------------

         This Agreement may be executed in counterparts  and by facsimile,  each
of  which  shall be  deemed  an  original,  and all of such  counterparts  taken
together shall constitute one and the same instrument.

                                       20





                           [Signature page to follow]

                                       21





                                                                 EXECUTION COPY


         IN WITNESS WHEREOF,  Licensor and Company have caused this Agreement to
be executed as of the date first written above.

PROTEIN POLYMER TECHNOLOGIES, INC.       SURGICA CORPORATION


By:/s/ William N. Plamondon, III         By:/s/ Louis R. Matson
   -----------------------------            -----------------------------------
     William N. Plamondon, III              Louis R. Matson
     Chief Executive Officer                Present and Chief Executive Officer


                      [Signature Page to License Agreement]

EX-10

                                                                    Exhibit 10.3

                                                                  EXECUTION COPY

                          SUPPLY AND SERVICES AGREEMENT

         THIS SUPPLY AND SERVICES AGREEMENT is entered into as of December 19,
2005 (the "Effective Date") by and between PROTEIN POLYMER TECHNOLOGIES, INC., a
Delaware corporation ("Company") and SURGICA CORPORATION, a Delaware corporation
("Surgica"). Company and Surgica are each hereinafter referred to as a "Party"
and collectively as the "Parties".

                              W I T N E S S E T H:

         WHEREAS, Company and Surgica have entered into an Asset Purchase Option
Agreement, dated as of November 23, 2005 (the "Option Agreement"), pursuant to
which Company, among other things, obtained the right to purchase from Surgica
substantially all of the assets of Surgica then existing or thereafter acquired
through the date of the exercise of the Option (as that term is defined in the
Option Agreement);

         WHEREAS, in connection with the Option Agreement and this Agreement,
the Parties are entering into a separate License Agreement of even date herewith
(the "License Agreement") wherein Company acquires from Surgica an exclusive
license to Intellectual Property for use in the Field;

         WHEREAS, Surgica has experience in the development of Products and has,
or will have as a result of the Parties fulfilling their obligations hereunder,
the facilities, equipment, employees, materials and other resources to
accomplish development and manufacturing activities, on behalf of Company, with
respect to the Intellectual Property; and

         WHEREAS, as partial consideration offered by Surgica to induce Company
to enter into the Option Agreement, Surgica desires to supply certain services
and manufactured goods and materials to Company and receive certain services
from Company.

         NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein set forth and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parties hereto
hereby agree as follows:

1.    Definitions. All capitalized terms used but not defined in this Agreement
shall have the meanings ascribed thereto in the License Agreement. The following
terms shall have the meanings set forth below:

      1.1   "Clinical Use" shall mean use in humans.

      1.2   "Deliverable" shall mean services, materials or items to be
delivered by one Party to the other under this Agreement pursuant to a Project
Plan.

      1.3 "Delivery Dates" shall mean the delivery dates for specific orders of
Product as may be specified by Company in its reasonable discretion in a Project
Plan or Order.

      1.4 "ECA" means the European Competent Authorities, any Notified Bodies,
or any successor agencies responsible for European Regulatory Approvals.





      1.5 "Surgica Financial Difficulty" shall mean the occurrence of: (a)
filing in any court pursuant to any statute, a petition in bankruptcy or
insolvency or for reorganization in bankruptcy or for an arrangement or for the
appointment of a receiver or trustee for such Party of its assets; (b) being
served with an involuntary petition against it, filed in any insolvency
proceeding, and where such petition has not been dismissed within sixty (60)
days after the filing thereof; (d) proposing or being a party to any
dissolution; or (e) making an assignment for the benefit of creditors.

      1.6 "Fully-Burdened Cost" shall mean all of the direct and proportional
indirect costs and expenses for providing the specified Product or services,
including but not limited to raw materials and supplies, labor, equipment,
utilities, facilities and overhead as determined according to generally accepted
accounting principles (GAAP) consistently applied. Specifically, with respect to
Company's Fully-Burdened Costs, such Fully-Burdened Costs shall include, without
limitation, amounts paid to Surgica pursuant to the applicable budgets provided
for herein.

      1.7 "Governmental Body" means any: (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or entity and any court or other
tribunal); (d) multi-national organization or body; or (e) individual, entity or
body exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.

      1.8 "Non-Clinical Use" shall mean use other than in humans.

      1.9 "Company Facilities" shall mean Company's offices and laboratory space
located at 10655 Sorrento Valley Road, San Diego, California 92121 or, in the
event Company no longer maintains offices and laboratory space at such address,
such new address as Company shall maintain offices and/or laboratory space.

      1.10 "Company's Technology" shall mean all inventions, discoveries,
know-how, works of authorship, methods, processes, data, information,
technology, research tools, techniques, processes, methods, compositions,
tangible materials (including, without limitation, vectors, proteins, assays and
the like), formulas and all other scientific or technical information or
materials, in whatever form, and all rights embodied in intellectual property
therein and thereto anywhere in the world, that are owned, controlled or
licensed-in by Company (excluding any Intellectual Property licensed-in from
Surgica or its Affiliates) and Company's Confidential Information, and all
embodiments thereof.

      1.11 "Cost of Goods Sold" or "COGS" shall have the definition set forth in
Section 5.5.1.3.

                                       2





      1.12 "Product" shall mean Products as defined in the License Agreement
provided by Surgica to Company that are set forth in the applicable Project Plan
or Order under this Agreement.

      1.13 "Project" shall mean a project referred to in Section 2 below and as
further defined in each Project Plan (defined in Section 2.2 below).

      1.14 "Project Technology" shall mean all inventions, discoveries,
know-how, works of authorship, methods, processes, data, information,
technology, research tools, techniques, processes, methods, compositions,
tangible materials, formulas and all other scientific or technical information
or materials, in whatever form, that are invented, discovered, developed or
otherwise generated by either Party, their respective Affiliates or both Parties
jointly during and in the course of the obligations set forth herein and in each
Project Plan hereunder, and conducted pursuant hereto and thereto, and all
rights embodied in intellectual property therein and thereto anywhere in the
world.

      1.15 "Regulatory Agency" means (a) the FDA, (b) the ECA, or (c) any other
Governmental Body with regulatory authority similar to the FDA or ECA in any
other jurisdiction anywhere in the world.

      1.16 "Regulatory Approval" shall mean with respect to any country, filing
for and receipt of all regulatory agency or other registrations, clearances and
approvals required in such country in respect of Product for any purpose
specified in this Agreement or, if no purpose is specified, to enable Product to
be manufactured, offered for sale, sold and distributed, and for Non-Clinical
Use or Clinical Use to take place, in such country.

      1.17 "Surgica's Technology" shall mean all inventions, discoveries,
know-how, works of authorship, methods, processes, data, information,
technology, research tools, techniques, processes, methods, compositions,
tangible materials, formulas and all other scientific or technical information
or materials, in whatever form, and all rights embodied in Intellectual Property
therein and thereto anywhere in the world, that are owned, controlled or
licensed-in by Surgica (excluding any intellectual property licensed-in from
Company or its Affiliates) and Surgica's Confidential Information, and all
embodiments thereof.

      1.18 "Surgica Budget" shall mean the currently approved budget for
Surgica's operations under approved Project Plans.

2.    Project Development.

      2.1  Management Committee; Project Coordinators. As of the Effective Date,
the Parties have formed a Management Committee (the "Committee") to oversee the
Parties' rights and obligations under this Agreement. Each Party shall designate
in Exhibit A attached hereto one (1) individual who will be the initial "Project
Coordinator" for such Party and up to two (2) representatives (each, a
"Representative"). Together, the Project Coordinators shall (a) serve on the
Committee, (b) have management authority, (c) facilitate day-to-day
communications between the Parties, (d) monitor the schedules and progress of,
and have responsibility for, the work performed under this Agreement, (e)
receive and submit requests for information and/or assistance, (f) supervise the
exchange of Confidential Information (defined in Section 10 below),

                                       3





and (g) designate its authority to one or more of the responsibilities listed in
clauses (a) through (f) above to its respective representative(s). Company's
Project Coordinator shall serve as the chair person of the Management Committee.
The Project Coordinators will meet (including telephonically) as is required by,
or reasonably desirable to, Company to discuss the progress of the development
effort for each Project and, if applicable, to exchange information and
Deliverables. Neither Party's Project Coordinator is authorized to amend, alter
or extend this Agreement in any manner. All disputes concerning one or more
Projects shall be resolved by the chair person of the Management Committee. Each
Party may change its Project Coordinator and/or Representative(s) at any time,
and from time to time, by giving the other Party prior written notice.

      2.2  Preparation of Project Plan. For each Project that the Parties
undertake under this Agreement, the Committee shall prepare a project plan
("Project Plan") setting forth the goals and objectives of, and Surgica's budget
for, the Project, identified with respect to the Parties' responsibilities. The
Parties agree that the Project Plan shall automatically, without any further
action by the Parties, incorporate the terms and conditions of this Agreement.
The Project Plan shall be reviewed quarterly by the Committee and may be
amended, but only if such amendment is in writing and signed by each Project
Coordinator. In the event of any conflict between any terms of this Agreement
and the terms set forth in any Project Plan, the terms of this Agreement shall
govern.

      2.3  Project Plan No. 1. Prior to the Effective Date, the Parties shall
agree upon a Project Plan (which shall be adopted by the Committee upon the
Effective Date) under which Surgica shall [*****] as more specifically set
forth in Schedule 2.3 attached hereto ("Project Plan No. 1"). Surgica shall use
commercially reasonable efforts to (i) collaborate with and assist Company with
obtaining all necessary certifications and Regulatory Approval concerning
Project Plan No. 1; and (ii) provide data and technical support as reasonably
requested by Company in connection with Company's fulfillment of its obligations
under Project Plan No. 1.

      2.4  Surgica Budget. As of the Effective Date, the Parties agree that the
Project Plan No. 1 Budget shall be the Surgica Budget for the first year under
this Agreement. Every six (6) months, the Committee shall prepare an updated
budget for the succeeding twelve (12) months, taking into consideration progress
against the Sales Forecast and each Project Plan. The updated Surgica Budget
shall be approved in writing by the Company's Project Coordinator.
Notwithstanding the foregoing, the Surgica Budget may be adjusted from time to
time, and at any time, upon the prior written approval of Company's Project
Coordinator. According to the Surgica Budget then in effect, Surgica shall
invoice company monthly in advance and Company shall pay Surgica the invoiced
amount within ten (10) days.

      2.5  Surgica Budget Reconciliation. No later than fifteen (15) days after
the conclusion of each calendar quarter, Surgica shall complete a review of its
actual expenses under the applicable Project Plan(s) and reconcile and compare
such actual expenses against the sum of all payments (including, without
limitation, any credits that result from the reconciliation of the Surgica
Budget from any prior calendar quarter(s)) made during the calendar quarter just


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

                                       4





concluded by Company (i) pursuant to the Surgica Budget, and (ii) that were made
to Surgica or on behalf of Surgica, to a third party, that, in Company's sole
discretion, were reasonably necessary or desirable to reduce the risk of an
event of a Surgica Financial Difficulty ("Budget Payments"). Surgica shall
provide an accurate report of the results of its review to Company upon
completion. If Company's Budget Payments exceed Surgica's actual expenses
(including any amounts paid by Company on behalf of Surgica) during the reviewed
calendar quarter, Company may apply the difference (i.e., the amount of Budget
Payments that was in excess of Surgica's actual expenses during the reviewed
period) to its next Budget Payment(s) to Surgica.

      2.6  Submission of Project Proposals for Additional Projects. Either Party
may submit to the Project Coordinators a project proposal describing the
Project, the work to be performed, and to the extent then determinable, a
preliminary development schedule. The Project Coordinators shall each promptly
review and evaluate the project proposal. If the Project Coordinators each agree
to pursue the subject matter of the proposal, the Committee shall prepare a
Project Plan. Approval of a Project Plan shall be effective only if the
president and/or chief executive officer of each Party approves the Project Plan
in writing. Each Project Coordinator will notify the other of approval or
rejection of a Project Plan or may propose modifications to a Project Plan. Any
Project Plan not approved by both Parties within thirty (30) days following
submission shall be deemed rejected. Upon the approval of any additional Project
Plan, the Surgica Budget shall be revised as required, subject to the prior
written approval of Company's Project Coordinator.

      2.7  Development Obligations. Each Party shall use its commercially
reasonable efforts to undertake and complete each Project in accordance with,
and substantially on the schedule specified in, the applicable Project Plan.
Notwithstanding the foregoing, prior to the expiration of the Option Period (as
that term is defined in the Option Agreement), Surgica shall prioritize and
utilize one hundred percent of its resources to and for the work performed under
this Agreement. Company shall provide Surgica with a monthly statement
describing Company's Fully-Burdened Costs incurred under this Agreement.

      2.8  Acceptance by Company.
           ---------------------

           2.8.1 When Surgica has completed a Deliverable due under a Project
Plan, Surgica shall deliver it to Company. Company may reject a Deliverable by
providing Surgica with a written notice describing the Deliverable's failure to
meet a material requirement stated in the applicable Project Plan (a
"Nonconformity").

           2.8.2 Following rejection of a Deliverable pursuant to this Agreement
due to a Nonconformity, Surgica will use commercially reasonable efforts to
promptly correct such Nonconformity. When it has made the necessary corrections,
Surgica will again deliver the Deliverable to Company and the
acceptance/rejection/correction provisions of Section 2.6.1 above shall be
reapplied until the Deliverable is accepted; provided, however, that upon the
third or any subsequent rejection, Company may terminate this Agreement by
thirty (30) days prior written notice unless the Deliverable is accepted during
the notice period.

      2.9  Costs and Expenses. Except as otherwise provided herein, each Party
shall bear its own costs and expenses incurred by it in performing work under
this Agreement.

                                       5





      2.10  Site Visits. For purposes of reviewing the progress of any Project,
the Parties may facilitate an exchange of technical personnel to work on-site at
each other's facilities. Company shall be free to visit those portions of
Surgica's facilities where work on the Project is being conducted. Such visits
shall be at reasonable intervals following reasonable notice during regular
business hours. Each Party shall indemnify and hold the other Party harmless
from and against any liability arising from the activities of its employees in
the other Party's facilities.

      2.11 Project Delays; Project Failure. If at any time during the course of
any Project, either Party (the "Delaying Party") anticipates that it will not be
able to meet any milestone or other target or deadline for which it is
responsible by the date set forth on the applicable Project Plan or established
by the Management Committee, the Delaying Party shall so notify the other Party
(the "Affected Party") in writing specifying the reasons for delay. From and
after such notice, the Parties shall cooperate and use diligent efforts to solve
the problems identified, and the milestone dates or other deadlines may, with
the Affected Party's written approval, be set back for as long a period as is
required to solve the problems so identified; provided, however, that if for any
reason other than due to the fault of Company, Surgica fails or will fail to
complete a milestone or other target or deadline, then Company may terminate
this Agreement immediately on written notice pursuant to Section 12 below.

      2.12 Inventory Services. Surgica shall provide inventory services to
Company including, without limitation, reasonable facilities to store inventory
of Product developed and/or manufactured hereunder.

3.    Ownership.

      3.1  Company's Technology and Project Technology. Except as expressly and
unambiguously licensed herein or in the License Agreement, as between the
Parties, Company shall retain and exclusively own all rights, title and interest
(including all intellectual property and proprietary rights throughout the
world) in and to Company's Technology and the Project Technology, and any and
all improvements, modifications and derivative works thereof created hereunder
(by whomever produced).

           3.1.1 Assignment. Surgica agrees to assign and does hereby assign to
Company all rights, title and interest including, without limitation, copyright
rights, patent rights, trade secret rights, mask work rights and all other
intellectual property and proprietary rights that Surgica may have or acquire
throughout the world in and to any improvements, modifications and derivative
works of Company's Technology or the Project Technology made, conceived or
reduced to practice, alone or with others, during the course of development
under this Agreement or any Project Plan. The foregoing shall apply to all
rights of every kind and character whatsoever throughout the world, whether or
not such rights are now existing or come into existence hereafter, and whether
or not such rights are now known, recognized or contemplated. Surgica agrees to
perform, during and after the term of this Agreement, all acts deemed necessary
or desirable by Company to permit and assist it in evidencing, recording and
perfecting such assignment and to enforce, maintain and defend the rights being
assigned hereunder. In connection with such assignment, Surgica irrevocably
designates and appoints Company its agent and attorney-in-fact to act for and in
its behalf to execute, register and file any applications, and to perform all
other lawfully permitted acts, to further the registration,

                                       6





prosecution and issuance of copyrights, patents, trademarks and similar
protections with the same legal force and effect as if executed by Surgica.

      3.2  Surgica's Technology. As between the Parties, Surgica shall retain
and exclusively own all title to and, except as expressly and unambiguously
licensed herein or in the License Agreement, all rights and interest (including
all intellectual property and proprietary rights throughout the world) in
Surgica's Technology and any and all improvements, modifications and derivative
works thereof (by whomever produced).

      3.3  Protective Filings. Company shall have the exclusive right and be
responsible for determining whether and to what extent to file applications for
copyrights, patents, trademarks and similar protections and to maintain any
issued copyrights, trademarks, patents and similar protections (and all
divisions, continuations, continuations in part, reissues, reexaminations or
extensions thereof) anywhere in the world relating to Company's Technology, the
Project Technology and, to the extent it is licensed to Company hereunder or
pursuant to the License Agreement, Surgica's Technology. Surgica shall fully
cooperate with Company as may be necessary for the preparation, filing and
prosecution of each such application and for maintenance, renewal and defense of
each copyright, trademark, patent or similar protection granted, including
executing all documents and maintaining and furnishing all records reasonably
necessary to perform such acts concerning the Project Technology and/or
Surgica's Technology. Company shall provide Surgica with a complete copy of each
patent application and all communications received from, or sent to, the United
States Patent and Trademark Office and foreign government patent offices
concerning Surgica's Technology, to the extent applicable.

      3.4  Regulatory Approvals. Company shall be responsible for all filings
with Regulatory Agencies related to Product throughout the world. All regulatory
submissions and Regulatory Approvals concerning Company's Technology, the
Project Technology and, to the extent it is licensed to Company hereunder or
pursuant to the License Agreement, Surgica's Technology, shall be held by and in
the name of Company or its designees.

4.    License Grant.

      4.1  By Company. Subject to all of the terms and conditions of this
Agreement and any Project Plan, Company hereby grants to Surgica a royalty-free,
non-exclusive, non-transferable, non-sublicensable and worldwide license for the
term of this Agreement to:

           4.1.1 make, use, reproduce, modify and create any derivative works of
any Project Technology; and

           4.1.2 make, use, reproduce, modify and create derivative works of
Company's Technology solely for the purpose of performing its development
obligations pursuant to this Agreement and strictly in accordance with, and
subject to the limitations set forth in, the applicable Project Plan.

      4.2 By Surgica. Subject to all of the terms and conditions of this
Agreement and any Project Plan, Surgica hereby grants to Company:

                                       7





           4.2.1 a non-exclusive, non-transferable, non-sublicensable,
royalty-free and worldwide license for the term of this Agreement to make, have
made, use, reproduce, modify and create derivative works of Surgica's Technology
for the purpose of performing its development obligations pursuant to this
Agreement and strictly in accordance with the applicable Project Plan.

5.    Supply of Products; Post-Supply Obligations.

      5.1 Supply. Surgica, within the limitations contained in this Section 5,
shall exclusively sell to Company such quantities of Product for Clinical Use as
Company may order through a purchase order ("Order"), subject to the terms
thereof. Surgica shall provide to Company Product for Non-Clinical Use as may be
reasonably requested by Company from time to time.

      5.2  Quantity.
           --------

           5.2.1 Within ten (10) days of Effective Date, with respect to each
Product described in Project Plan No. 1, Company shall deliver to Surgica a
good-faith forecast of Company's estimated quantity requirements for such
Product for the succeeding twelve (12) months (the "Sales Forecast"), which
Company shall update quarterly. With respect to Product developed pursuant to
additional Project Plans, Company shall provide such forecast no later than
three (3) months prior to the anticipated date of Regulatory Approval. Surgica
shall reasonably manage its capacity, resources and inventory to ensure a supply
of Product in inventory to completely and timely satisfy Company's estimates and
forecasts. The failure of Surgica to supply Company with Product pursuant to the
Sales Forecast shall be a material breach of this Agreement.

      5.3  Delivery.
           --------

           5.3.1 Prior to the release of any Product lot into Surgica's
inventory for Clinical Use, Surgica shall (a) provide to Company all documents
necessary (or reasonably requested by Company) to permit Company to confirm that
the applicable lot meets the applicable specifications, including without
limitation copies of all certificates, reports, test results or other
information produced by Surgica, or by a third party consultant or contractor at
Surgica's request, and (b) obtain written approval from Company that Company has
reviewed and is satisfied that the applicable lot meets such specifications.

           5.3.2 All Products ordered pursuant to an Order shall be delivered to
Company or its designee(s) as specified in the Order, F.O.B. Surgica's plant or
other place of shipment. Surgica shall deliver Product by the applicable
Delivery Dates and assist Company in arranging any desired insurance (in amounts
that Company shall determine) and transportation. All customs, duties, costs,
taxes, insurance premiums, and other expenses relating to such transportation
and delivery shall be at Company's expense.

           5.3.3 Surgica will package Product for shipment in accordance with
the specifications set forth in applicable Project Plan or Order, as applicable.

      5.4  Rejection of Product in Case of Nonconformity.
           ---------------------------------------------

                                       8





           5.4.1 Company may reject any lot of Product which is (i) not
conforming with the specifications for the applicable Product or (ii)
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act (the "Act").

                 5.4.1.1 In order to reject a Product lot, Company must (i) give
notice to Surgica of Company's intent to reject the lot within fifteen (15) days
of receipt of the documentation specified in 5.3.1 (a) together with a written
indication of the reasons for such rejection. After notice of intent to reject
is given, Company shall cooperate with Surgica in determining whether rejection
is necessary or justified. In the case of Products having latent defects which
upon diligent examination by Company could not have been discovered, Company
must give notice of Company's intent to reject within five (5) days after
discovery of such defects, provided that such notice may in no event be given
later than one hundred and eighty (180) days after Company's approval of the lot
for release to inventory. In the event that any Product is found to be defective
within such one hundred and eighty (180) day period by Company, a Company
customer or subcontractor, Surgica shall credit Company against any royalty
payments due for the total cost of the defective Product, plus all other costs
incurred, including, but not limited to the costs of other materials, subsequent
processing costs, transportation costs, and the costs of product recalls.

                 5.4.1.2 In any event, Company shall pay for the Product as
otherwise provided herein and shall be entitled to a refund of the purchase
price (together with insurance and freight charges) of properly rejected
Products at the time they are ultimately rejected, provided that if Surgica
disputes the rejection, credit shall be made against the royalty due Surgica, if
at all, at the time the dispute is finally resolved. Surgica shall notify
Company as promptly as reasonably possible whether it accepts Company's basis
for any rejection and, in no event, later than fifteen (15) days after receipt
of Company's notice of rejection.

           5.4.2 Whether or not Surgica accepts Company's basis for rejection,
promptly on receipt of a notice of rejection, Surgica shall use its best
efforts, at Company's request, to provide replacement Product which shall be
purchased by Company as provided in this Agreement.

           5.4.3 Unless Surgica requests the return to it of a defective lot
within thirty (30) days of receipt of Company's notice of rejection, Company
shall destroy such lot promptly and provide Surgica with certification of such
destruction. Company shall, upon receipt of Surgica's request for return,
promptly dispatch said lot to Surgica, at Surgica's cost, expense and risk, such
cost and expense to be credited against any royalty due Surgica.

                                       9





      5.5  Price and Payments.
           ------------------

           5.5.1 Price.
                 -----

                 5.5.1.1 Non-Clinical Use Product. Surgica shall [*****] for
reasonable amounts of Product for Non-Clinical Use.

                 5.5.1.2 Interim Period. Until Company's Net Sales of Product
for Clinical Use exceeds its Fully-Burdened Costs, the price for Product for
Clinical Use shall be the price set in the applicable Project Plan, as may be
amended from time to time by mutual written agreement of the Parties.

                 5.5.1.3 Post-Interim Period. If Company's Net Sales of Product
exceeds its Fully-Burdened Costs, the Parties shall mutually determine the Cost
of Goods Sold ("Cost of Goods Sold" or "COGS"), which shall be based upon a
rigorous analysis of relevant overhead and actual labor in production. Upon
determination and mutual written agreement of COGS for each applicable Product
for Clinical Use, the applicable Project Plan shall be amended to include such
definition and all applicable Product for Clinical Use supplied pursuant to this
Agreement shall bear such COGS price.

                 5.5.1.4 Reconciliation. From time to time, the Product
Coordinators shall meet and reconcile the operational definition of COGS against
the actual cost of goods sold. Unless otherwise agreed to in writing, any
amounts paid by Company in excess of the actual cost of goods sold may be (i)
credited against future purchases of Product for Clinical Use or future payments
to be made to Surgica pursuant to the applicable Surgica Budget or (ii) credited
against any royalty due Surgica, at the discretion of Company.

           5.5.2 Method of Payment. Unless otherwise provided for herein, all
payments due hereunder to Surgica shall be paid to Surgica not later than thirty
(30) days following the date of the applicable invoice.

           5.5.3 Records; Examination of Books. Surgica shall keep and maintain
adequate and compete records and books of account documenting all of its
expenses related to the respective Project Plans and Products provided to
Company hereunder. Company shall have the right, at its own expense, for any
period during which Company purchases Product hereunder and for three (3) years
thereafter, to have an independent public accountant, reasonably acceptable to
Surgica, examine the relevant financial books and records of account of Surgica
during normal business hours, upon reasonable notice, to determine or verify the
appropriate Fully-Burdened Cost of Product purchased hereunder. If an error of
two percent (2%) or more in Company's favor (i.e., if Surgica had overcharged
for the supplied Product in an amount equal to 2% or more of the actual
Fully-Burdened Cost of such Product) are discovered as a result of such
examination, the expense of such examination and the deficiency (including
interest on the delinquent amount of not less than one percent (1%) per month)
shall be credited against any royalty due Surgica. The opinion of such
independent public accountant shall be binding on the parties hereto with
respect to Fully-Burdened Cost hereunder.

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

                                       10






      5.6  Production and Quality Control.
           ------------------------------

           5.6.1 Surgica warrants, represents and covenants that all Product
produced for or supplied to Company hereunder shall (a) be manufactured free
from defects in materials and workmanship; (b) with respect to Product for
Clinical Use, (i) meet the specifications in all applicable Regulatory Approvals
of all applicable Regulatory Agencies including, without limitation, compliance
with applicable ISO 13485 Standards, Council Directive Concerning Medical
Devices 93/42/EEC, and Quality Systems Regulations in effect at the time of
production and/or such other lawful and appropriate standards as the parties may
agree upon in writing. Each Party acknowledges that production specifications
may be modified from time to time to comply with applicable laws and
regulations.

           5.6.2 Surgica shall retain samples of all ingredients, packaging
materials, records and data as may be in accordance with the sample and record
retention policies which Surgica uses (or used) in connection with manufacture
of Product for its own account; provided such retention shall at all times be in
accordance with all applicable Regulatory Approvals, Quality System Regulations,
Council Directive Concerning Medical Devices 93/42/EEC, and ISO 13485 Standards.
Company shall have the right, no more frequently than once every six (6) months,
to review Surgica's manufacturing procedures and operations and its records
relating to the manufacture and shipment of Product. Additionally, Company may
from time to time audit Surgica's compliance with all applicable Regulatory
Approvals (including, without limitation, Quality System Regulations, Council
Directive Concerning Medical Devices 93/42/EEC, and ISO 13485). Surgica shall
notify Company in writing of any contemplated changes to, or modifications of,
its facilities, methods, processes, specifications, or other aspect of its
manufacturing operations that may have an impact on the efficacy or safety of
the Product and shall seek and, subject to Company's discretion, obtain
Company's written approval of such changes or modifications before implementing
the contemplated changes and/or modifications. No inspection or testing of
Product by Company, or failure to test or inspect, nor any audit, or failure to
audit, shall relieve Surgica of its obligations hereunder. Copies of all
certificates, reports, test results or other information produced by Surgica, or
by a third party consultant or contractor at Surgica's request, that directly
relate to lots of Product supplied to Company or its designee(s) shall, upon the
written request of Company, be furnished to Company and may be relied upon by
it.

      5.7  Title to Product. Surgica hereby covenants, represents and warrants
to Company that title to all Product supplied hereunder shall pass to Company
and all Company customers and subcontractors as provided herein (or in the
applicable Project Plan or Order) free and clear of any security interest, lien,
or other encumbrance.

      5.8  Post-Supply Obligations.

           5.8.1 Complaints. Company and Surgica shall develop a protocol for
exchanging information on product complaints concerning each of the Products of
which either Party becomes aware, so as to allow each of Company and Surgica to
comply with its respective regulatory obligations. At a minimum, such protocol
shall provide that if either Party receives a complaint or information regarding
a Product with respect to which would be required under applicable law to be
disclosed to a Regulatory Agency, it shall promptly, but in any event not

                                       11





later than seventy-two hours (72) hours after receipt, advise the other Party in
writing of the details of such complaint or information. Promptly thereafter,
Company shall report such complaint or information to the appropriate Regulatory
Agencies. The Party initially receiving the complaint or information shall
provide the other Party with all available follow-up information related to such
incident (including any information in such Party's possession as may be
reasonably required by the other Party to satisfy its regulatory filing
obligations). Surgica will provide Company with any information in its
possession that may facilitate prompt and favorable resolution of any customer
complaints pertaining to the Product.

           5.8.2 Recalls. Recalls shall be directed by Company in its sole
discretion. If Company, in its sole discretion , by order of a government or
government agency, or at the direction of Surgica, determines to recall any
Product, Company shall notify Surgica promptly by telephone or electronic mail
or telecopy. Company shall give Surgica reasonable opportunity to comment in
advance on any public announcement to be made by Company regarding any recall.
In the event any Product is recalled, Company shall assume complete
responsibility for conducting such recall; however, Surgica shall timely provide
Company with all information that may be in Surgica's possession or control
concerning the manufacture of the Product which Company reasonably may require
to conduct such recall. Company and Surgica shall fully cooperate with each
other to identify and correct deficiencies, if any, in the manufacture,
shipment, storage or distribution of Product.

6.    General Representations and Warranties; Disclaimer.

      6.1  Representations and Warranties. Each Party represents and warrants to
the other that:

           (i) this Agreement has been duly authorized, executed and delivered
and constitutes a valid and binding obligation of such Party, enforceable in
accordance with its terms;

           (ii) there are no outstanding agreements, assignments, claims or
encumbrances inconsistent with the provisions of this Agreement;

           (iii) it has the full power and right to grant the licenses,
sublicenses and rights herein and that it will obtain agreements with its
employees and consultants sufficient to allow it to provide the assignments
granted herein; and

           (iv) performance of all the terms of this Agreement shall not breach
any agreement entered into prior to the execution of this Agreement to keep
proprietary information acquired by it in confidence or in trust.

      6.2  Warranty Disclaimer. EXCEPT FOR SUCH REPRESENTATIONS AND WARRANTIES
AS ARE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT WITH RESPECT TO ANY DEVELOPED PRODUCT, ANY LICENSE GRANTED
HEREIN OR SERVICES PERFORMED HEREUNDER.

                                       12





7.    Limited Liability.

      EXCEPT WITH RESPECT TO EACH PARTY'S INDEMNIFICATION AND CONFIDENTIALITY
OBLIGATIONS (SET FORTH IN SECTIONS 2.8, 9, 10 AND 14), NOTWITHSTANDING ANYTHING
ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY SHALL BE LIABLE OR OBLIGATED
UNDER ANY SECTION OF THIS AGREEMENT OR UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY SPECIAL, EXEMPLARY,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

8.    Insurance.

      Company and Surgica shall, prior to commencement of activities involving
Clinical Use of Product, and at all times thereafter until twelve (12) months
after the expiration or termination of this Agreement, each carry such products
liability and comprehensive general liability insurance, premises and
operations, naming the other party as an insured under such policy, and in such
amounts and subject to such other requirements and restrictions as may be
customary in the United States; provided, however, that Surgica shall not be
required to carry product liability insurance during the period commencing on
the Effective Date and continuing until the earlier of (i) the Effective Date of
the Purchase Agreement pursuant to Company exercising the Option (as that term
is defined in the Option Agreement) and (ii) the expiration or earlier
termination of the Option Agreement. Surgica and Company shall have the right to
audit the other party to ensure compliance with this obligation. [*****] The
parties agree that any failure to comply with the obligations of this Section 8
shall be deemed a material breach of this Agreement.

9.    Indemnification.

      9.1  Company Indemnification. Company shall indemnify and hold harmless,
pursuant to the provisions of this Section 9, Surgica and each of its officers,
directors, employees, agents and Affiliates (collectively, the "Surgica
Indemnitees"), from and against, and will reimburse each such Surgica Indemnitee
with respect to, any and all Third Party claims, actions, demands, losses,
damages, liabilities, costs and expenses to which such Surgica Indemnitee may
become subject, including reasonable fees and disbursements of counsel and
expenses of reasonable investigation (collectively, "Surgica Losses"), arising
out of, based upon or caused by: (a) the inaccuracy of any representation or the
breach of any warranty, covenant or agreement of Company contained in this
Agreement, the License Agreement or the Option Agreement; (b) any failure by
Company to conduct its obligations arising hereunder in a diligent and
professional manner and in accordance with all applicable laws and regulations;
or (c) any gross negligence or intentional wrongdoing by Company in the
performance of its obligations (except in each case, and solely to the extent,
that any Surgica Loss is due to the gross negligence or willful misconduct of
one or more Surgica Indemnitees).

      9.2  Surgica Indemnification. Surgica shall indemnify and hold harmless,
pursuant to the provisions of this Section 9, Company and each of its officers,
directors, employees, agents

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

                                       13





and Affiliates (collectively, the "Company Indemnitees"), from and against, and
will reimburse each such Company Indemnitee with respect to, any and all Third
Party claims, actions, demands, losses, damages, liabilities, costs and expenses
to which such Company Indemnitee may become subject, including reasonable fees
and disbursements of counsel and expenses of reasonable investigation
(collectively, "Company Losses"), arising out of, based upon or caused by: (a)
the inaccuracy of any representation or the breach of any warranty, covenant or
agreement of Surgica contained in this Agreement, the License Agreement or the
Option Agreement; (b) the manufacture or supply of Products; (c) any failure by
Surgica to conduct its obligations arising hereunder in a diligent and
professional manner and in accordance with all applicable laws and regulations;
(d) infringement by Surgica's Technology or Project Technology developed by
Surgica in connection with this Agreement or any Project Plan of any Patent
issued as of the date of delivery of such of Surgica's Technology or Project
Technology or any Copyright or Trademark or misappropriation of any trade
secret; or (e) any gross negligence or intentional wrongdoing by Surgica in the
performance of its obligations (except in each case, and solely to the extent,
that any Company Loss is due to the gross negligence or willful misconduct of
one or more Company Indemnitees); provided, however, that Surgica shall not be
obligated to indemnify the Company Indemnitees for claims arising out of any
Product's infringement of any intellectual property right of a Third Party
resulting from such Company Indemnitee's: (i) misuse or mishandling of Product
or (ii) unauthorized modification of Product.

      9.3  Indemnification Procedures. Each Party, on behalf of itself and its
respective Surgica Indemnitees or Company Indemnitees (each such Person, an
"Indemnitee"), agrees to provide the indemnifying Party prompt written notice of
any action, claim, demand, discovery of fact, proceeding or suit (collectively,
a "Claim") for which such Indemnitee intends to assert a right to
indemnification under this Agreement; provided, however, that failure to give
such notification shall not affect each applicable Indemnitee's entitlement to
indemnification (or the corresponding indemnifying Party's indemnification
obligations) hereunder except to the extent that the indemnifying Party shall
have been prejudiced as a result of such failure. The indemnifying Party shall
have the initial right (but not obligation) to defend, settle or otherwise
dispose of any Claim for which an Indemnitee intends to assert a right to
indemnification under this Agreement as contemplated in the preceding sentence
if, and for so long as, the indemnifying Party has recognized in a written
notice to the Indemnitee provided within thirty (30) days of such written notice
its obligation to indemnify the Indemnitee for any Surgica Losses or Company
Losses (as the case may be) relating to such Claim; provided, however, that if
the indemnifying Party assumes control of the defense, settlement or disposition
of a Claim, the indemnifying Party shall obtain the written consent of each
applicable Indemnitee prior to ceasing to defend, settling or otherwise
disposing of the Claim. If the indemnifying Party fails to state in a written
notice during such thirty (30) day period its willingness to assume the defense
of such a Claim, the Surgica Indemnitee(s) or Company Indemnitee(s), as the case
may be, shall have the right to defend, settle or otherwise dispose of such
Claim, subject to the applicable provides of Sections 9.1 and 9.2.

10.   Confidentiality.

      10.1 Subject to Section 10.3, during the term of this Agreement and for a
period of five (5) years thereafter (except with respect to trade secrets, for
which the obligations of non-use and non-disclosure shall continue for so long
as such trade secrets are protected by their owner as

                                       14





trade secrets), each Party shall maintain in confidence and shall not disclose
to any Third Party any know-how, trade secrets, business or technical
information or other information ("Confidential Information") received from the
other Party relating to any Product, and shall not use the other Party's
Confidential Information except for the purposes of this Agreement without the
prior written consent of such other Party. These confidentiality and non-use
obligations shall not apply to any Confidential Information that the receiving
Party can demonstrate:

           10.1.1 at the time of disclosure to the receiving Party was, or
thereafter becomes, a part of the public domain through no fault of the
receiving Party, its Affiliates, distributors or sublicensees;

           10.1.2 was subsequently lawfully disclosed to the receiving Party by
a Third Party not under an obligation of confidentiality with or through the
disclosing Party;

           10.1.3 was in the lawful possession of the receiving Party prior to
disclosure by the disclosing Party; or

           10.1.4 is required to be disclosed by judicial or administrative
order, provided that notice is given to the disclosing Party and the disclosing
Party has an opportunity, if reasonable under the circumstances, to seek a
protective order, and further provided, that disclosure is limited solely to
compliance with the judicial or administrative order.

      10.2 During the term of this Agreement, each Party shall take all
reasonable steps to:

           10.2.1 prevent any disclosure in breach of Section 10.1 of
Confidential Information of the other which would be materially prejudicial to
the interests of the other Party;

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

           10.2.3 ensure that the persons referred to in Section 10.2.2 enter
into appropriate confidentiality agreements containing use and disclosure
restrictions at least as restrictive as those set forth herein.

      10.3 Notwithstanding the foregoing provisions of this Section, the Parties
and their Affiliates, distributors and sublicensees shall be entitled to
disclose Confidential Information of the other Party which would otherwise be
protected by the provisions of Section 10.1 to actual or potential customers for
any Product in so far as such disclosure is reasonably necessary to
commercialize such Product.

      10.4 Equitable Relief. Each Party acknowledges and agrees that, due to the
unique nature of the other's Proprietary Information, there can be no adequate
remedy at law for any breach of its obligations hereunder and, therefore, that
upon any breach of Section 10.1 or threat thereof, the other Party shall be
entitled to injunctive relief and other appropriate equitable relief, without
the posting of any bond, in addition to whatever remedies it may have at law.

                                       15





11.   Non-Solicitation. During the term of this Agreement and for one (1) year
thereafter, neither Party shall, directly or indirectly, encourage, solicit or
participate in the solicitation of any employee or consultant of the other Party
to terminate such employee's or consultant's employment with such other Party;
provided, however, that such prohibition shall not apply to mass-media
advertisements directed toward the general public.

12.   Term and Termination.

      12.1 Term. The term of this Agreement shall commence as of the date hereof
and, unless terminated earlier pursuant to the provisions of this Agreement,
shall expire upon the expiration or termination of the License Agreement.

      12.2 Termination. The obligations of a Party under this Agreement (but not
its rights hereunder) may be terminated by such Party if, subject to Section 13
below, the other Party fails to perform any material term, provision, covenant
or obligation imposed upon it under this Agreement, which failure or refusal
shall continue for thirty (30) days following written notice thereof from the
non-defaulting party specifying the event of default.

           12.2.1 The failure of a Party to terminate its obligations under this
Agreement by reason of the breach of any of the provisions by the other Party
shall not be construed as a waiver of the rights or remedies available for any
subsequent breach of the terms and provisions of this Agreement.

           12.2.2 A Party electing to terminate its obligations under this
Agreement shall also be entitled to pursue such additional remedies at law or in
equity that it may have as a result of a breach of or default under this
Agreement by the other Party.

           12.2.3 Any Party bringing action to enforce the obligations of the
other Party or its rights under this Agreement shall be entitled to recover all
costs and expenses (including reasonable attorneys' fees and court costs)
incurred by it in such enforcement action.

      12.3 Effect of Termination. Upon termination of this Agreement by either
Party or naturally at the end of the term of this Agreement all rights and
licenses granted hereunder, except as otherwise expressly provided by the terms
hereof, shall terminate.

      12.4 Not Sole Remedy. Termination is not the sole remedy under this
Agreement and, whether or not termination is effected, all other remedies shall
remain available.

      12.5 Survival. Following expiration or termination of this Agreement,
Sections 3, 4.2, 5.4, 5.5, 5.6, 5.7, 6 through 12, 11 (for one (1) year only),
12.3, 12.5, 17, and 18, and such provisions of Section 1 as are necessary to
implement the surviving provisions shall remain in full force and effect in
accordance with their terms.

                                       16





13.   Force Majeure.

      13.1 Subject to compliance with paragraph (b) of this Section 13 any
delays in or failure of performance by either Party under this Agreement shall
not be considered a breach of this Agreement if and to the extent caused by any
occurrences beyond the reasonable control of the Party affected, including but
not limited to: acts of God; acts, regulations or laws of any government;
strikes or other concerted acts of workers; fires; floods; explosions; riots;
wars; rebellion; embargo; and sabotage; and any time for performance hereunder
shall be extended by the actual time of delay caused by such occurrence. The
Party suffering from a force majeure event shall take reasonable measures to
remove the disability or restriction and resume operations at the earliest
possible date.

      13.2 Any Party affected by such force majeure who wishes to rely on the
provisions of Section 13.1 shall as soon as reasonably practicable give written
notice to the other Party specifying the matters constituting force majeure
together with such evidence thereof as it can reasonably give and specifying the
period for which it is estimated that the such delay will continue.

14.   Relationship of the Parties. Notwithstanding any provision hereof, for all
purposes of this Agreement each Party shall be and act as an independent
contractor and not as partner, joint venturer, or agent of the other and shall
not bind nor attempt to bind the other to any contract. Each Party (the
"Responsible Party") shall indemnify and hold harmless the other Party (the
"Protected Party") from any and all claims, liabilities, damages, debts,
settlements, costs, attorneys' fees, expenses and liabilities of any type
whatsoever that may arise on account of the activities of the Responsible
Party's employees or agents, including, without limitation, providing
unauthorized representations or warranties (or failing effectively to disclaim
all warranties and liabilities on behalf of the Protected Party) to its
customers.

15.   Assignment. Surgica shall not assign or otherwise transfer this Agreement
or  any part hereof (and any attempt to do so will be void) to any Third Party
without the prior written permission of Company, except to an entity that
acquires all or substantially all of such Party's assets or operations. The
provisions of this Agreement shall inure to the benefit of, and be binding upon,
Company and Surgica and their respective successors and assigns.

16.   Publicity and Press Releases. Except to the extent necessary under
applicable laws, the Parties agree that no press releases or other publicity
relating to the substance of the matters contained herein will be made without
joint approval.

17.   Arbitration.

      17.1 Excepting only actions and claims relating to actions commenced by a
Third Party against Surgica or Company (including, without limitation, for
injuries caused by a Product or in respect to a trademark or patent infringement
claim), any controversy or claim arising out of or relating to the terms and
conditions of this Agreement, or the decision to agree upon these terms, or the
breach thereof, including questions of validity, infringement, or termination
hereof, shall be settled exclusively by arbitration in accordance with the rules
of the American Arbitration Association. If such controversy or claim relates to
patent validity or infringement, then the

                                       17





Patent Arbitration Rules of the American Arbitration Association ("AAA") shall
apply; otherwise the International Arbitration Rules of the AAA shall apply.
Notwithstanding the foregoing to the contrary or in the arbitration rules
invoked or in this Section 17, the Parties retain the right to request a
judicial authority to invoke interim measures of protection, and such request
shall not be deemed incompatible with this agreement to arbitrate or a waiver of
the right to arbitrate.

      17.2 There shall be one (1) arbitrator to be mutually agreed upon by the
Parties and to be selected from the Regional Panel of Distinguished Neutrals. If
the Parties are unable to agree upon such an arbitrator who is willing to serve
within ten (10) days of receipt of the demand by the other Party, the Parties
shall within three (3) days select one of the four largest international public
accounting firms (excluding those providing services to the Parties) and engage
the managing partner or senior officer of its County office located in the
county containing the principal place of business of the Party who did not
initiate the arbitration to designate a partner of such firm to serve as the
arbitrator. Failing that, then the AAA shall appoint an arbitrator willing to
serve from the Regional Panel of Distinguished Neutrals, or if no such panel
exists, then from an appropriate AAA panel. It shall be the duty of the
arbitrator to set dates for preparation and hearing of any dispute and to
expedite the resolution of such dispute.

      17.3 The arbitration shall be held in the city in which the principal
place of business of the Party who did not initiate the arbitration is located
and the arbitrator shall apply the substantive law of California except that the
interpretation and enforcement of this arbitration provision shall be governed
by the Federal Arbitration Act.

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

      17.5 The arbitrator will set a discovery schedule with which the Parties
will comply and attend depositions if requested by either Party.

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

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

      17.8 The arbitrator shall not be empowered to award either Party exemplary
or punitive damages or any enhanced damages for willful infringement and the
Parties shall be deemed to have waived any right to such damages.

      17.9 A qualified court reporter will record and transcribe the proceeding.

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

                                       18





      17.11 Prompt handling and disposal of the issue is important. Accordingly,
the arbitrator is instructed to assume adequate managerial initiative and
control over discovery and other aspects of the proceeding to schedule discovery
and other activities for substantially continuous work, thereby expediting the
arbitration as much as is deemed reasonable to him, but in all events to effect
a final award no later than 365 days after the arbitrator's selection or
appointment and no later than 20 days after the close of evidence.

      17.12 The proceedings shall be confidential and the arbitrator shall issue
appropriate protective orders to safeguard both Parties' confidential
information.

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

18.   Miscellaneous.

      18.1 Entire Agreement. This Agreement (and all Exhibits hereto and Project
Plan(s) pursuant to this Agreement) constitutes the entire and only agreement
between the Parties relating to the subject matter hereof, and supersedes all
proposals, prior negotiations, representations, understandings and agreements
between the Parties relating to the subject matter of this Agreement and of past
dealings or industry custom.

      18.2 Notices.

           18.2.1 Notices hereunder shall be in writing and shall be deemed to
have been duly given if personally delivered or when sent by facsimile or other
telegraphic means. Such notices shall be effective upon receipt, if by personal
delivery, or if by facsimile, on the date of the confirmation of "ok"
transmission. Addresses and persons to be notified may be changed by either
Party by giving written notice thereof to the other Party.

           For Surgica:

                  Surgica Corporation
                  5090 Robert J. Mathews Parkway #4
                  El Dorado Hills, Ca 95762
                  Facsimile:  916.933.5260
                  Attention:  Louis R. Matson

                  with a copy to:

                  Bullivant Houser Bailey
                  1331 Garden Hwy, Suite 300
                  Sacramento, CA 95833
                  Facsimile:  916.442.3442
                  Email eric.stiff@bullivant.com
                  Attention:  Eric J. Stiff, Esq.

                                       19





           For Company:

                  Protein Polymer Technologies, Inc.
                  10655 Sorrento Valley Road
                  San Diego, CA  92121
                  Facsimile:  858.558.6477
                  Email:   wnp@ppti.com; jtp@ppti.com
                  Attention:  William N. Plamondon, Chief Executive Officer
                  and J. Thomas Parmeter, Chairman

                  with a copy to:

                  Paul, Hastings, Janofsky & Walker LLP
                  515 South Flower Street
                  Los Angeles, CA  90071-2228
                  Facsimile:  213.996.3254
                  Attention:  Robert A. Miller Jr., Esq.

      18.3 Governing Law and Legal Actions. This Agreement shall be governed by
and construed under the laws of the State of California and the United States,
without regard to the conflicts of laws provisions thereof. Subject to Section
17 above, the sole jurisdiction and venue for actions related to the subject
matter hereof shall be the Superior Court of the State of California for San
Diego County or the United States District Court for the Southern District of
California. Both Parties consent to the jurisdiction of such courts and agree
that process may be served in the manner provided herein for giving of notices
or otherwise as allowed by California state or U.S. federal law. In any action
or proceeding to enforce rights under this Agreement, the prevailing Party shall
be entitled to recover costs and attorneys' fees.

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

      18.5 Amendments and Waivers. No terms or provisions of this Agreement
shall be varied or modified by any prior, contemporaneous or subsequent
statement, conduct or act of either of the Parties, whether oral or written,
except that the Parties may amend this Agreement by written instrument
specifically referring to this Agreement. No waiver of any right or remedy
hereunder shall be effective unless in a writing signed by the Party to be
bound, nor shall any waiver in one instance constitute a waiver of the same or
any other right or remedy in any other instance.

      18.6 Headings. Headings included herein are for convenience only and shall
not be used to interpret or construe this Agreement.

      18.7 Remedies; Injunctive Relief. The rights and remedies of a Party set
forth herein with respect to failure of the other Party to comply with the terms
of this Agreement are not

                                       20





exclusive, the exercise thereof shall not constitute an election of remedies and
the aggrieved Party shall in all events be entitled to seek whatever additional
remedies may be available in law or in equity (including, without limitation,
appropriate injunctive relief).

      18.8 Counterparts. This Agreement may be executed in counterparts and by
facsimile, each of which shall be deemed an original, and all of such
counterparts taken together shall constitute one and the same instrument.

                           [Signature page to follow]

                                       21





         IN WITNESS WHEREOF, Company and Surgica have caused this Agreement to
be executed as of the date first written above.

PROTEIN POLYMER TECHNOLOGIES, INC.        SURGICA CORPORATION


By:/s/ William N. Plamondon, III          By:/s/ Louis R. Matson
   ------------------------------            -----------------------------------
       William N. Plamondon, III             Louis R. Matson
       Chief Executive Officer               Present and Chief Executive Officer



                [Signature Page to Supply and Services Agreement]

EX-10

                                                                    Exhibit 10.4

                                                                  EXECUTION COPY

                                VOTING AGREEMENT

         This Voting Agreement ("Agreement") is made and entered into as of
November 23, 2005, by and between Protein Polymer Technologies, Inc., a Delaware
corporation ("Purchaser"), and the undersigned stockholder ("Stockholder") of
Surgica Corporation, a Delaware corporation (the "Company"). Certain capitalized
terms used in this Agreement are defined in Section 6 hereof and certain other
capitalized terms used in this Agreement that are not defined herein shall have
the meaning given to such terms in the Option Agreement (as defined below).

                                    RECITALS

         WHEREAS, Stockholder is the holder of record and the "beneficial owner"
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of certain shares of common stock and/or preferred stock of the
Company;

         WHEREAS, concurrently with the execution and delivery of this
Agreement, Purchaser and the Company are entering into an Asset Purchase Option
Agreement (the "Option Agreement") which provides, upon the terms and subject to
the conditions set forth therein, the Purchaser the right to purchase from the
Company substantially all of the assets of the Company (the "Acquisition") then
existing or thereafter acquired through the date of the exercise of the Option
pursuant to the Purchase Agreement attached thereto, between the Purchaser, its
wholly-owned subsidiary and the Company.

         WHEREAS, as a condition and inducement to Purchaser's willingness to
enter into the Option Agreement, Stockholder has agreed to execute and deliver
this Agreement.

                                    AGREEMENT

         NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:

         1. Agreement to Vote Shares. Prior to the Termination Date (as defined
in Section 6), at every meeting of the stockholders of the Company called with
respect to any of the following, and at every adjournment or postponement
thereof, and on every action or approval by written consent of the stockholders
of the Company with respect to any of the following, Stockholder shall vote the
Subject Securities: (a) in favor of the adoption of the Option Agreement and the
grant of the Option contemplated thereby (b) in favor of adoption of the
Purchase Agreement and approval of the Acquisition, (c) against any proposal for
any acquisition transaction, other than the Acquisition, between the Company and
any Person other than Purchaser and/or a wholly-owned subsidiary of Purchaser,
and (d) against any other action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Option Agreement or Purchase Agreement or which would
result in any of the conditions to the consummation of the effectiveness of the
Option under the Option Agreement or the Acquisition under the Purchase
Agreement not being fulfilled.





         2. Irrevocable Proxy. Concurrently with the execution of this
Agreement, Stockholder agrees to deliver to Purchaser a proxy in the form
attached hereto as Exhibit A (the "Proxy"), which shall be irrevocable to the
fullest extent permitted by law, with respect to the shares referred to therein.

         3. Agreement to Retain Shares.

            (a) Restriction on Transfer. Except as otherwise provided in
Schedule A, attached hereto, and Section 3(c), during the period from the date
of this Agreement through the Termination Date, Stockholder shall not, directly
or indirectly, cause or permit any Transfer of any of the Subject Securities to
be effected.

            (b) Restriction on Transfer of Voting Rights. During the period from
the date of this Agreement through the Termination Date, Stockholder shall
ensure that: (a) none of the Subject Securities is deposited into a voting
trust; and (b) no proxy (other than the Proxy granted herein) is granted, and no
voting agreement or similar agreement is entered into, with respect to any of
the Subject Securities.

            (c) Permitted Transfers. Section 3(a) shall not prohibit a Transfer
of Company Common Stock by Stockholder (i) upon the death of Stockholder, or
(ii) if Stockholder is a partnership or limited liability company, to one or
more partners or members of Stockholder or to an affiliated corporation under
common control with Stockholder; provided, however, that a Transfer referred to
in this sentence shall be permitted only if, as a precondition to such Transfer,
the transferee agrees in a writing, reasonably satisfactory in form and
substance to Purchaser, to be bound by the terms of this Agreement and delivers
a Proxy to Purchaser in substantially the form of Exhibit A.

4. Representations, Warranties and Covenants of Stockholder. Stockholder hereby
represents and warrants to Purchaser as follows:

            (a) Due Authorization, Etc. All consents, approvals, authorizations
and orders necessary for the execution and delivery by Stockholder of this
Agreement and the Proxy have been obtained, and Stockholder has full right,
power and authority to enter into this Agreement and the Proxy. This Agreement
and the Proxy have been duly executed and delivered by Stockholder and
constitute valid and binding agreements of Stockholder enforceable in accordance
with their terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally and subject to general principles of equity.

            (b) No Conflict. The execution and delivery of this Agreement and
the Proxy by Stockholder do not, and the performance of this Agreement and the
Proxy by Stockholder will not conflict with or violate any law, rule,
regulation, order, decree or judgment applicable to the Subject Securities held
by the Stockholder.

            (c) Title to Securities. As of the date of this Agreement: (a)
Stockholder holds of record (free and clear of any encumbrances or restrictions)
the number of outstanding shares of Company Common Stock and Company Preferred
Stock set forth under the heading "Shares Held of Record" on the signature page
hereof; (b) Stockholder holds (free and clear of





any encumbrances or restrictions) the options, warrants and other rights to
acquire shares of Company Common Stock set forth under the heading "Options and
Other Rights" on the signature page hereof; (c) Stockholder Owns the additional
securities of the Company set forth under the heading "Additional Securities
Beneficially Owned" on the signature page hereof; and (d) Stockholder does not
directly or indirectly Own any shares of capital stock or other securities of
the Company, or any option, warrant or other right to acquire (by purchase,
conversion or otherwise) any shares of capital stock or other securities of the
Company, other than the shares and options, warrants and other rights set forth
on the signature page hereof.

         5. Additional Covenants of Stockholder.

            (a) Further Assurances. From time to time and without additional
consideration, Stockholder shall (at Stockholder's sole expense) execute and
deliver, or cause to be executed and delivered, such additional transfers,
assignments, endorsements, proxies, consents and other instruments, and shall
(at Stockholder's sole expense) take such further actions, as Purchaser may
request for the purpose of carrying out and furthering the intent of this
Agreement.

         6. Certain Definitions. For purposes of this Agreement,

            (a) "Company Common Stock" shall mean the common stock, par value
$0.001 per share, of the Company.

            (b) "Company Preferred Stock" shall mean the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, each having a par
value of $0.001 per share, and any other series of preferred stock of the
Company.

            (c) Stockholder shall be deemed to "Own" or to have acquired
"Ownership" of a security if Stockholder is the "beneficial owner" of such
security within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended.

            (d) "Person" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership or other entity, or (iii) Governmental
Body.

            (e) "Subject Securities" shall mean: (i) all securities of the
Company (including all shares of Company Common Stock, Company Preferred Stock
and all options, warrants and other rights to acquire shares of Company Common
Stock or Company Preferred Stock) Owned by Stockholder as of the date of this
Agreement; and (ii) all additional securities of the Company (including all
additional shares of Company Common Stock, Company Preferred Stock and all
additional options, warrants and other rights to acquire shares of Company
Common Stock or Company Preferred Stock) of which Stockholder acquires Ownership
during the period from the date of this Agreement through the Termination Date.

            (f) "Termination Date" means the earlier to occur of the date (i)
the Acquisition shall become effective in accordance with the terms and
provisions of the Purchase Agreement, or (ii) the Option Agreement terminates in
accordance with its terms without the exercise of the Option.





            (g) A Person shall be deemed to have a effected a "Transfer" of a
security if such Person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security to any Person other than Purchaser or a wholly-owned
subsidiary of Purchaser; (ii) enters into an agreement or commitment
contemplating the possible sale of, pledge of, encumbrance of, grant of an
option with respect to, transfer of or disposition of such security or any
interest therein to any Person other than Purchaser or a wholly-owned subsidiary
of Purchaser; or (iii) reduces such Person's beneficial ownership of, interest
in or risk relating to such security.

         7. Miscellaneous.

            (a) Assignment; Binding Effect. Except as provided herein, neither
this Agreement nor any of the interests or obligations hereunder may be assigned
or delegated by Stockholder, and any attempted or purported assignment or
delegation of any of such interests or obligations shall be void. Subject to the
preceding sentence, this Agreement shall be binding upon Stockholder and his
heirs, estate, executors and personal representatives and his successors and
assigns, and shall inure to the benefit of Purchaser and its successors and
assigns. Without limiting any of the restrictions set forth in Section 3(a) or
elsewhere in this Agreement, this Agreement shall be binding upon any Person to
whom any Subject Securities are transferred. Nothing in this Agreement is
intended to confer on any Person (other than Purchaser and its successors and
assigns) any rights or remedies of any nature.

            (b) Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
Proxy were not performed in accordance with its specific terms or were otherwise
breached and in the event of any breach or threatened breach by Stockholder of
any covenant or obligation contained in this Agreement or in the Proxy,
Purchaser shall be entitled (in addition to any other remedy that may be
available to it, including monetary damages) to seek (a) a decree or order of
specific performance to enforce the observance and performance of such covenant
or obligation, and (b) an injunction restraining such breach or threatened
breach.

            (c) Waiver. No failure on the part of Purchaser to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of Purchaser in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Purchaser shall not be deemed to have waived any
claim available to Purchaser arising out of this Agreement, or any power, right,
privilege or remedy of Purchaser under this Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Purchaser; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.

            (d) Governing Law; Venue. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts or
choice of law. Any legal action or other legal proceeding relating to





this Agreement or the Proxy or the enforcement of any provision of this
Agreement or the Proxy may be brought or otherwise commenced in any state or
federal court located in the State of California.

            (e) Counterparts. This Agreement may be executed in two or more
counterparts (including by facsimile), each of which shall be deemed an original
and all of which together shall constitute one instrument.

            (f) Entire Agreement. This Agreement and the Proxy constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings between the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon either party unless made in writing and signed
by both parties.

            (g) Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.





         The parties have caused this Agreement to be duly executed on the date
first above written.

                           PURCHASER:

                           PROTEIN POLYMER TECHNOLOGIES,  INC.


                           By:    /s/ William N. Plamondon, III
                                  --------------------------------------------
                           Name:  William N. Plamondon, III
                                  --------------------------------------------
                           Title: Chief Executive Officer
                                  --------------------------------------------

                           Address for notices:

                           Protein Polymer Technologies, Inc.
                           10655 Sorrento Valley Road
                           San Diego, CA  92121
                           Facsimile:  858.558.6477
                           Email: wnp@ppti.com; jtp@ppti.com
                           Attention:  William N. Plamondon, Chief Executive
                           Officer and J. Thomas Parmeter, Chairman

                           STOCKHOLDER:


                           By:    /s/ Louis R. Matson
                                  --------------------------------------------
                           Name:  Louis R. Matson
                                  --------------------------------------------
                           Title: President and Chief Executive Officer
                                  --------------------------------------------

                                  Address for notices:

                                  Surgica Corporation
                                  5090 Robert J. Mathews Parkway #4
                                  El Dorado Hills, Ca 95762
                                  Facsimile:  916.933.5260
                                  Attention:  Louis R. Matson, President and
                                  Chief Executive Officer






Company Common Stock          Company Preferred                                         Additional Securities
   Held of Record           Stock Held of Record         Options and Other Rights         Beneficially Owned
   --------------           --------------------         ------------------------         --------------------
                                                                               
      5,732,000                       0                             0                              0




                      [Signature Page to Voting Agreement]

EX-10

                                                                  EXECUTION COPY

                                    EXHIBIT A

                                IRREVOCABLE PROXY

         The undersigned stockholder (the "Stockholder") of Surgica Corporation,
a Delaware corporation (the "Company"), hereby irrevocably (to the fullest
extent permitted by law) appoints Protein Polymer Technologies, Inc., a Delaware
corporation ("Purchaser"), as the sole and exclusive attorney and proxy of the
undersigned, with full power of substitution and resubstitution, to vote and
exercise all voting and related rights expressly provided herein (to the full
extent that the undersigned is entitled to do so) with respect to (i) the
outstanding shares of capital stock of the Company owned of record by the
Stockholder as of the date of this Proxy, which shares are specified on the
final page of this Proxy, and (ii) any and all other shares of capital stock of
the Company which the Stockholder may acquire on or after the date hereof. (The
shares of the capital stock of the Company referred to in clauses "(i)" and
"(ii)" of the immediately preceding sentence are collectively referred to as the
"Shares.") Upon the undersigned's execution of this Proxy, any and all prior
proxies given by the undersigned with respect to any Shares are hereby revoked
and the undersigned agrees not to grant any subsequent proxies with respect to
the Shares at any time prior to the Termination Date (as defined below).

         This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Voting
Agreement of even date herewith, by and between Purchaser and the Stockholder,
and is granted in consideration of Purchaser entering into that certain Asset
Purchase Option Agreement (the "Option Agreement") which provides, upon the
terms and subject to the conditions set forth therein, the Purchaser the right
to purchase from the Company substantially all of the assets of the Company (the
"Acquisition") then existing or thereafter acquired through the date of the
exercise of the Option (as defined in the Option Agreement) for the purchase
price described in the Purchase Agreement (as defined in the Option Agreement)
attached thereto, between the Purchaser, its wholly-owned subsidiary, and the
Company. As used herein, the term "Termination Date" shall mean the earlier to
occur of the date (i) the Acquisition shall become effective in accordance with
the terms and provisions of the Purchase Agreement, or (ii) the Option Agreement
terminates in accordance with its terms without the exercise of the Option.

         The attorney and proxy named above, is hereby authorized and empowered
by the undersigned, at any time prior to the Termination Date, to act as the
undersigned's attorney and proxy to vote the Shares, and to exercise all voting
and other rights of the undersigned with respect to the Shares (including,
without limitation, the power to execute and deliver written consents pursuant
to Section 141 of the Delaware General Corporation Law), at every annual,
special or adjourned meeting of the stockholders of the Company and in every
written consent in lieu of such meeting: (i) in favor of approval and adoption
of the Acquisition and the Purchase Agreement and in favor of any matter that
could reasonably be expected to facilitate the Acquisition, (ii) against any
proposal for any Acquisition Transaction, other than the Acquisition, between
the Company and any person or entity (other than Purchaser or a wholly-owned
subsidiary of Purchaser) and (iii) against any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Option Agreement or
Purchase Agreement or which could result in any






of the conditions to the consummation of the Acquisition under the Option
Agreement or Purchase Agreement not being fulfilled.









                           [Signature page to follow]






         This Proxy shall be binding upon the heirs, estate, executors, personal
representatives, successors and assigns of the Stockholder (including any
transferee of any of the Shares).

Dated:  November 23, 2005
                                              /s/ Louis R. Matson
                                 ----------------------------------------------
                                           (Signature of Stockholder)

                                                Louis R. Matson
                                 ----------------------------------------------
                                          (Print Name of Stockholder)


                                 Number of shares of common stock of the
                                 Company owned of record as of the date
                                 of this proxy:

                                                  5, 732,000
                                 ----------------------------------------------

                                 Number of shares of preferred stock of the
                                 Company owned of record as of the date of this
                                 proxy:

                                                      0

EX-99

Exhibit 99.1

Protein Polymer Technologies Completes License Agreement with

Surgica Corporation

Patented Embolization Products Target Potential Multi-Million Dollar Market Opportunities

San Diego, CA – December 20, 2005 – Protein Polymer Technologies, Inc. (OTC Bulletin Board: PPTI), a biotechnology device company that is a pioneer in protein design and synthesis today announced that it has entered into an exclusive, worldwide License Agreement with Surgica Corporation through which PPTI has acquired the rights to Surgica’s technology and products. This license arrangement is completed pursuant to the asset purchase option agreement between the two companies previously announced.

Under the terms of the agreement, PPTI will receive the exclusive rights to develop and commercialize Surgica’s three FDA-cleared polyvinyl alcohol (PVA) based embolization products – PVA Plus™, MicroStat™ and MaxiStat™ and one additional product under development, Blocker™. PPTI will assume up to approximately $650,000 of certain Surgica liabilities, cash payments of up to approximately $400,000 against certain other Surgica liabilities and a royalty to Surgica of 25 percent of net profits on revenues generated by the sale of the Surgica products.

“We are pleased that this deal has been completed. Execution of this license agreement is a key event for PPTI, and is one more step in continuing to strengthen and expand our pipeline,” said William N. Plamondon III, Chief Executive Officer of PPTI. “As we move forward, we plan to continue to be aggressive in the licensing and collaboration front in support of our strategic priority of evolving our research and development governance.”

As anticipated, PPTI also completed the Supply and Services Agreement which provides for the manufacture of product by Surgica and the provision of services to PPTI including further product development, in exchange for operating payments to Surgica.

Manufactured according to a proprietary process, Surgica’s patented PVA foam embolization products include both spherical and standard particle forms. Advancing standard PVA technology that has been safely used in humans for over 30 years, Surgica’s products have fluid suspension properties intended to maximize product performance.

PPTI and Surgica have developed three new sterile convenience kits packaged with Surgica’s PVA products designed to improve ease of use for physicians and overall procedure efficiency. PPTI anticipates introducing these newly designed convenience kits in late March 2006 at the Society of Interventional Radiology Annual Scientific Meeting.

Currently, Surgica’s products are cleared for use in the endovascular management of arteriovenous malformations and neoplastic lesions when presurgical devascularization is desirable. PPTI plans to submit a new 510(k) application to the FDA to expand the labeled indications for Surgica’s products to include treatment of uterine fibroids, liver cancer and certain other applications.

Approximately 70 percent of the projected 275,000 hysterectomies performed to treat uterine fibroids in 2005 would benefit from this procedure. PPTI estimates a conservative annual market potential for uterine fibroids embolization could exceed $200 million in the U.S. and $300 - $500 million worldwide.

Embolic agents are also used in the treatment of inoperable liver cancer, a condition affecting approximately 75,000 people in the United States in 2005, with an annual market potential of $200 million in the U.S. and $400 million worldwide.

About Protein Polymer Technologies, Inc.

Protein Polymer Technologies, Inc. is a biotechnology company that discovers and develops innovative therapeutic devices to improve medical and surgical outcomes. The Company focuses on developing technology and products to be used for soft tissue augmentation, tissue adhesives and sealants, wound healing support and drug delivery devices. Protein Polymer Technologies’ proprietary protein-based biomaterials are uniquely tailored to optimize clinical performance and contain no human or animal components that could potentially transmit or cause disease. The company is headquartered in San Diego, California. For additional information about the company, please visit www.ppti.com.

To date, PPTI has been issued twenty-six U.S. Patents on its core technology with corresponding issued and pending patents in key international markets.

This press release contains forward-looking statements that are based on management's views and expectations. Actual results could differ materially from those expressed here; further, the Company is not obligated to comment specifically on those differences. Risks associated with the Company's activities include raising adequate capital to continue operations scientific and product development uncertainties, competitive products and approaches, continuing collaborative partnership interest and funding, regulatory testing and approvals, and manufacturing scale up. The reader is encouraged to refer to the Company's 2004 Annual Report Form 10-KSB, and 10KSB/A and other recent filings with the Securities and Exchange Commission, copies of which are available from the Company, to further ascertain the risks associated with the above statements.

# # #

Investor Contact: Erin Davis, (858) 558-6064 x 120 Protein Polymer Technologies, Inc. Media Contact: Bryan deCastro, (631) 495-9177 Carole Boucard, (954) 370-2524 Creative Public Relations