Exhibit 10.1

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of December 23, 2008, by and
between ISTA PHARMACEUTICALS, INC., a Delaware corporation (the “Borrower”) and
SILICON VALLEY BANK (“Bank”).

1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated on or about December 16, 2005,
as may be amended from time to time, (the “Loan Agreement”). Defined terms used
but not otherwise defined herein shall have the same meanings as in the Loan
Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Indebtedness.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the
Collateral as described in the Loan Agreement.

Hereinafter, the above-described security documents, together with all other
documents securing repayment of the Indebtedness shall be referred to as the
“Security Documents”. Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to as
the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

 

  A. Modification to Loan Agreement.

 

  1. Collateral to Exclude ARS. The Loan Agreement is hereby modified such that
the defined term “Collateral” shall not include the Auction Rate Securities (but
only such securities) listed on Exhibit A hereto (the “ARS Collateral”), and the
defined term “Collateral Account” shall not include the securities account (the
“ARS Account”) of Borrower at UBS as to the ARS Collateral (but only as to the
ARS Collateral), if and to the extent: (a) the ARS Collateral is held by
Borrower at UBS Financial Services (“UBS”), (b) the ARS Collateral is pledged by
Borrower to UBS to secure a loan in an original amount not to exceed $4,700,000
(the “Margin Loan”), and (c) the Margin Loan has been funded and some amount
thereof is outstanding. The Collateral shall include any proceeds of ARS
Collateral not applied by UBS to repay the Margin Loan and which is received by
Borrower. Any such proceeds shall be deposited by Borrower into a Collateral
Account. The foregoing exclusion of the ARS Collateral from the Collateral shall
be effective if and only so long as the Margin Loan or any portion thereof is
outstanding. Bank agrees to execute and/or deliver, as applicable, such further
instruments, documents or agreements as may be required to effect the provisions
of this paragraph.

 

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  2. Margin Loan and Pledge of ARS Collateral Not Event of Default. The Loan
Agreement is further modified to permit the Margin Loan and the Lien in favor of
UBS on the ARS Collateral (and the ARS Account as to the ARS Collateral) to
secure the Margin Loan, and the existence of the Margin Loan and such Lien shall
not constitute an Event of Default notwithstanding any provisions of the Loan
Agreement to the contrary; provided that any default under the Margin Loan which
results in recourse by UBS to any assets of Borrower other than the ARS
Collateral shall constitute an Event of Default.

 

  3. Section 2.2 is hereby amended and restated in its entirety to read as
follows:

2.2 Advances and Credit Extensions.

2.2.1 Revolving Advances.

(a) Availability. Subject to the terms and conditions of this Agreement, Bank
shall make Advances not exceeding the Revolving Line. Amounts borrowed under the
Revolving Line may be repaid and, prior to the Revolving Line Maturity Date,
reborrowed, subject to the applicable terms and conditions precedent herein.

(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest
thereon, and all other Obligations relating to the Revolving Line shall be
immediately due and payable.

2.2.2 Letters of Credit Sublimit.

(a) As part of the Revolving Line, Bank shall issue or have issued Letters of
Credit for Borrower’s account. The face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve) may not exceed $2,000,000, minus the FX Reserve and minus the amount
outstanding under the Cash Management Services Sublimit (“Letter of Credit
Sublimit”). Such aggregate amounts utilized hereunder shall at all times reduce
the amount otherwise available for Credit Extensions under the Revolving Line.
If, on the Revolving Maturity Date, there are any outstanding Letters of Credit,
then on such date Borrower shall provide to Bank cash collateral in an amount
equal to 105% of the face amount of all such Letters of Credit plus all
interest, fees, and costs due or to become due in connection therewith (as
estimated by Bank in its good faith business judgment), to secure all of the
Obligations

 

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relating to said Letters of Credit. All Letters of Credit shall be in form and
substance acceptable to Bank in its sole discretion and shall be subject to the
terms and conditions of Bank’s standard Application and Letter of Credit
Agreement (the “Letter of Credit Application”). Borrower agrees to execute any
further documentation in connection with the Letters of Credit as Bank may
reasonably request. Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and
opened for Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower understands and
agrees that Bank shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto.

(b) The obligation of Borrower to immediately reimburse Bank for drawings made
under Letters of Credit shall be absolute, unconditional, and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.

(c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign
Currency. If a demand for payment is made under any such Letter of Credit, Bank
shall treat such demand as an Advance to Borrower of the equivalent of the
amount thereof (plus fees and charges in connection therewith such as wire,
cable, SWIFT or similar charges) in Dollars at the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign Currency for
transfer to the country issuing such Foreign Currency.

(d) To guard against fluctuations in currency exchange rates, upon the issuance
of any Letter of Credit payable in a Foreign Currency, Bank shall create a
reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount
equal to ten percent (10%) of the face amount of such Letter of Credit. The
amount of the Letter of Credit Reserve may be adjusted by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.

2.2.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may
enter into foreign exchange contracts with Bank under which Borrower commits to
purchase from or sell to Bank a specific amount of Foreign Currency (each, a “FX
Forward Contract”) on a specified date (the “Settlement Date”). FX

 

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Forward Contracts shall have a Settlement Date of at least one (1) FX Business
Day after the contract date and shall be subject to a reserve of ten percent
(10%) of each outstanding FX Forward Contract in a maximum aggregate amount
equal to $2,000,000, minus any amounts outstanding under the Cash Management
Services Sublimit and under the Letter of Credit Sublimit (the “FX Reserve”).
The aggregate amount of FX Forward Contracts at any one time may not exceed ten
(10) times the amount of the FX Reserve. The amount otherwise available for
Credit Extensions under the Revolving Line shall be reduced by an amount equal
to ten percent (10%) of each outstanding Forward Contract. Any amounts needed to
fully reimburse Bank will be treated as Advances under the Revolving Line and
will accrue interest at the interest rate applicable to Advances.

2.2.4 Cash Management Services Sublimit. Borrower may use up to $2,000,000,
minus any amounts outstanding under the Letter of Credit Sublimit and minus the
amount of the FX Reserve (the “Cash Management Services Sublimit”) of the
Revolving Line for Bank’s cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in Bank’s various cash management services agreements
(collectively, the “Cash Management Services”). The dollar amount of any Cash
Management Services provided under this sublimit will reduce the amount
otherwise available for Credit Extensions under the Revolving Line. Any amounts
Bank pays on behalf of Borrower for any Cash Management Services will be treated
as Advances under the Revolving Line and will accrue interest at the interest
rate applicable to Advances.

 

  4. Section 2.5(b) is hereby amended and restated in its entirety to read as
follows:

(b) Advances. Each Advance shall bear interest on the outstanding principal
amount thereof from the date when made, continued or converted until paid in
full at a rate per annum equal to the greater of (a) the Prime Rate plus the
Prime Rate Margin, and (b) 4.5 percentage points (450 basis points). Pursuant to
the terms hereof, interest on each Advance shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of any Advance pursuant to this Agreement for the portion of any Advance so
prepaid and upon payment (including prepayment) in full thereof. All accrued but
unpaid interest on the Advances shall be due and payable on the Revolving Line
Maturity Date.

 

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  5. Section 2.6 is hereby amended to add subsections (d) and (e) thereto as
follows:

(d) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line
Facility Fee”), payable quarterly, in arrears, on a calendar year basis, in an
amount equal to 0.375% (37.5 basis points) per annum of the average unused
portion of the Revolving Line, as determined by Bank. The unused portion of the
Revolving Line, for the purposes of this calculation, shall include amounts
reserved under the Cash Management Services Sublimit for products provided and
under the Foreign Exchange Sublimit for FX Forward Contracts. Borrower shall not
be entitled to any credit, rebate or repayment of any Unused Revolving Line
Facility Fee previously earned by Bank pursuant to this Section notwithstanding
any termination of the Agreement or the suspension or termination of Bank’s
obligation to make loans and advances hereunder.

(e) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, each anniversary of the issuance, and the renewal
of such Letter of Credit.

 

  6. Section 6.6 is hereby amended and restated in its entirety to read as
follows:

6.6 Financial Covenants.

(a) Borrower shall maintain, on a consolidated basis with respect to Borrower
and its Subsidiaries a ratio (“Adjusted Quick Ratio”) of Quick Assets to Current
Liabilities, of at least 1.25 to 1.00 as of the last day of each month.

(b) Borrower shall maintain, on a consolidated basis with respect to Borrower
and its Subsidiaries, Tangible Net Worth of at least the following amounts as of
the last day of each quarter: (i) $20,000,000 for the quarters ending March 31,
2009, June 30, 2009, and September 30, 2009; and (ii) $25,000,000 thereafter.

 

  7. Section 9.1(b) is hereby amended to read as follows:

(b) stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank, and demand
that Borrower (i) deposits cash with Bank in an amount equal to the aggregate
amount of any Letters of Credit remaining undrawn, as collateral security for
the repayment of any future drawings under such Letters of Credit, and Borrower
shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter
of Credit fees scheduled to be paid or payable over the remaining term of any
Letters of Credit, and terminate any FX Contracts;

 

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  8. The definition of “Borrowing Base” in Section 13.1 is hereby amended and
restated to read as follows:

“Borrowing Base” is (a) 80% of Eligible Accounts plus (b) 25% of Net Cash (up to
$5,000,000), as determined by Bank from Borrower’s most recent Borrowing Base
Certificate; provided, however, that Bank may decrease the foregoing percentages
in its good faith business judgment based on events, conditions, contingencies,
or risks which, as determined by Bank, may adversely affect Collateral.

 

  9. The definition of “Eligible Accounts” in Section 13.1 is hereby amended and
restated to read as follows:

“Eligible Accounts” are Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right at any time and from time to time after the
Effective Date, to adjust any of the criteria set forth below and to establish
new criteria in its good faith business judgment. Unless Bank agrees otherwise
in writing, Eligible Accounts shall not include:

(a) Accounts for which the Account Debtor has not been invoiced;

(b) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date;

(c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

(d) Credit balances over ninety (90) days from invoice date;

(e) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five percent (25%) of all Accounts
(provided that such concentration percentage shall be 45% as to the Accounts due
from Account Debtors Amerisourcebergen, Cardinal Health, Inc., and McKesson
Corp.), for the amounts that exceed that percentage, unless Bank approves in
writing;

(f) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States unless supported by letters of credit
issued and negotiated by Bank or foreign credit insurance, in each case as
deemed acceptable by Bank;

 

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(g) Accounts owing from an Account Debtor which is a federal, state or local
government entity or any department, agency, or instrumentality thereof except
for Accounts of the United States if Borrower has assigned its payment rights to
Bank and the assignment has been acknowledged under the Federal Assignment of
Claims Act of 1940, as amended;

(h) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise - sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

(i) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”,
“bill and hold”, or other terms if Account Debtor’s payment may be conditional;

(j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

(k) Accounts in which the Account Debtor disputes liability or makes any claim
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

(l) Accounts owing from an Account Debtor with respect to which Borrower has
received deferred revenue (but only to the extent of such deferred revenue);

(m) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful; and

(n) other Accounts Bank deems ineligible in the exercise of its good faith
business judgment.

 

  10. A definition of “Foreign Currency” is hereby added to Section 13.1 which
shall read as follows:

“Foreign Currency” means lawful money of a country other than the United States.

 

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  11. A definition of “FX Business Day” is hereby added to Section 13.1 which
shall read as follows:

“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

 

  12. A definition of “Letters of Credit” is hereby added to Section 13.1 which
shall read as follows:

“Letters of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.2.2.

 

  13. The definition of “Prime Rate Margin” in Section 13.1 is hereby amended
and restated in its entirety to read as follows:

“Prime Rate Margin” is one-half (0.50) of a percentage point (50 basis points)
for such periods during which Borrower’s Adjusted Quick Ratio calculated under
Section 6.6(b) is greater than 1.50:1.00, and seven-eighths (0.875) of one
percentage point (87.5 basis points) during such periods Borrower’s Adjusted
Quick Ratio is less than or equal to 1.50:1.00.

 

  14. The definition of “Revolving Line” in Section 13.1 is hereby amended and
restated in its entirety to read as follows:

“Revolving Line” is an Advance or Advances and other Credit Extensions in an
aggregate amount outstanding at any time (including amounts outstanding or
reserved under the Letter of Credit Sublimit, the FX Reserve and the Cash
Management Services Sublimit) of up to the lesser of (a) $25,000,000 and (b) the
Borrowing Base.

 

  15. The definition of “Revolving Line Maturity Date” in Section 13.1 is hereby
amended and restated in its entirety to read as follows:

“Revolving Line Maturity Date” is the earlier of (a) December 31, 2009; and
(b) the date Bank exercises its remedies under Section 9.1(a).

 

  16. A new definition of “Tangible Net Worth” is hereby added to Section 13.1
which shall read as follows:

“Tangible Net Worth” means on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (a) any amounts attributable to
(i) goodwill, (ii) intangible items including

 

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unamortized debt discount and expense, patents, trade and service marks and
names, copyrights and research and development expenses except prepaid expenses,
(iii) notes, accounts receivable and other obligations owing to Borrower from
its officers or other Affiliates, and (iv) reserves not already deducted from
assets, minus (b) Total Liabilities, plus (c) Subordinated Debt.

 

  17. The definition of “Current Liabilities” in Section 13.1 is hereby amended
and restated in its entirety to read as follows:

“Current Liabilities” are all obligations and liabilities of Borrower to Bank,
plus, without duplication, the aggregate amount of Borrower’s Total Liabilities
that mature within one (1) year, less Deferred Revenue and the current portion
of Subordinated Debt.

 

  18. The form of Notice of Borrowing is hereby replaced with Exhibit B attached
hereto, the form of Compliance Certificate is hereby replaced with Exhibit D
attached hereto, and the form of Borrowing Base Certificate is hereby replaced
with Exhibit F attached hereto.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

5. NO DEFENSES OF BORROWER. Borrower agrees that, as of the date hereof, it has
no defenses against the obligations to pay any amounts under the Indebtedness.

6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrower’s representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank’s agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness.

7. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon the execution and delivery of this Modification Agreement and
the receipt by Bank of a loan modification fee in the amount of $62,500.

 

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This Loan Modification Agreement is executed as of the date first written above.

 

BORROWER:    BANK: ISTA PHARMACEUTICALS, INC.    SILICON VALLEY BANK By:  

/s/    Lauren P. Silvernail

   By:  

/s/    Brett Maver

Name:   Lauren P. Silvernail    Name:   Brett Maver Title:   Chief Financial
Officer, Chief Accounting Officer and Vice President, Corporate Development   
Title:   Relationship Manager

 

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Exhibit A

Auction Rate Securities

[Borrower to provide]

 

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EXHIBIT B

FORM OF NOTICE OF BORROWING

ISTA PHARMACEUTICALS, INC.

Date:                     

 

TO: SILICON VALLEY BANK

 

     2003 Tasman Drive

 

     Santa Clara, CA 95054

 

     Attention: Corporate Services Department

 

RE: Loan and Security Agreement dated as of December 16, 2005 (as amended,
modified, supplemented or restated from time to time, the “Loan Agreement”), by
and between ISTA PHARMACEUTICALS, INC., a Delaware corporation (“Borrower”), and
Silicon Valley Bank (the “Bank”)

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, the terms defined therein and used
herein as so defined, and hereby gives you notice irrevocably, pursuant to
Section 3.4(a) of the Loan Agreement, of the borrowing of an Advance.

1. The Funding Date, which shall be a Business Day, of the requested borrowing
is                     .

2. The aggregate amount of the requested borrowing is $                    .

The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the proposed Advance before and
after giving effect thereto, and to the application of the proceeds therefrom,
as applicable:

(a) all representations and warranties of Borrower contained in the Loan
Agreement are true, accurate and complete in all material respects as of the
date hereof; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;

(b) no Default or Event of Default has occurred and is continuing, or would
result from such proposed Advance; and

 

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(c) the requested Advance or other Credit Extension will not cause the aggregate
amount of the outstanding Credit Extensions (including all Advances and amounts
outstanding or reserved under the Letter of Credit Sublimit, the FX Reserve and
the Cash Management Services Sublimit) to exceed, as of the designated Funding
Date, the lesser of (a) the Revolving Line, and (b) the Borrowing Base minus all
amounts outstanding or reserved under the Letter of Credit Sublimit, the FX
Reserve and the Cash Management Services Sublimit.

 

BORROWER   ISTA PHARMACEUTICALS, INC.   By:  

 

  Name:  

 

 

Title:

 

 

 

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EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:  SILICON VALLEY BANK

  Date:                    

FROM: ISTA PHARMACEUTICALS, INC.

The undersigned authorized officer of ISTA PHARMACEUTICALS, INC., a Delaware
corporation (“Borrower”) certifies that under the terms and conditions of the
Loan and Security Agreement between Borrower and Bank (the “Agreement”),
(1) Borrower is in complete compliance for the period ending
                    with all required covenants except as noted below, (2) there
are no Events of Default, (3) all representations and warranties in the
Agreement are true and correct in all material respects on this date except as
noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date,
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank. Attached are the
required documents supporting the certification. The undersigned certifies that
these are prepared in accordance with generally GAAP consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The undersigned acknowledges that no borrowings may be requested at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that compliance is determined not just at the
date this certificate is delivered. Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

 

Required

 

Complies

Monthly financial statements with Compliance Certificate   Monthly within 30
days   Yes No 10-Q, 10-K and 8-K   Within 5 days after filing with SEC   Yes No
Borrowing Base Certificate, A/R & A/P Agings   Monthly within 20 days if
borrowing   Yes No

 

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Financial Covenant

   Required   Actual    Complies

Maintain:

       

Minimum Adjusted Quick Ratio, Monthly

   1.25:1.00               :1.0    Yes No

Minimum Tangible Net Worth, Quarterly

   $20MM or $25MM*   $                Yes No

 

* $20 million as of each quarter-end through 9/30/09; $25 million thereafter.

The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________________________________

__________________________________________

 

ISTA PHARMACEUTICALS, INC.

    

BANK USE ONLY

By:  

 

     Received by:  

 

Name:  

 

       AUTHORIZED SIGNER Title:  

 

     Date:  

 

       Verified:  

 

         AUTHORIZED SIGNER        Date:  

 

       Compliance Status:   Yes No

 

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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                     

I. Adjusted Quick Ratio (Section 6.6(a))

Required: 1.25:1.00

Actual:

 

A.    Aggregate value of the unrestricted cash and cash equivalents of Borrower
and its Subsidiaries   $             B.    Aggregate value of the net billed
accounts receivable of Borrower and its Subsidiaries   $             C.   
Aggregate value of the Investments with maturities of fewer than 12 months of
Borrower and it Subsidiaries   $             D.    Quick Assets (the sum of
lines A through C)   $             E.    Aggregate value of Obligations to Bank
  $             F.    Aggregate value of liabilities of Borrower and its
Subsidiaries (including all Indebtedness) that matures within one (1) year and
current portion of Subordinated Debt permitted by Bank to be paid by Borrower  
$             G.    Current Liabilities (the sum of lines E and F)  
$             H.    Value of Line D (Quick Assets)   $             I.    Value
of Line G (Current Liabilities)   $             J.    Aggregate value of all
amounts received or invoiced by Borrower in advance of performance under
contracts and not yet recognized as revenue   $             K.    Line I minus
line J   $             L.    Adjusted Quick Ratio (line H divided by line K)  

Is line L equal to or greater than 1.25:1.00?

 

             No, not in compliance

               Yes, in compliance

 

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II. Tangible Net Worth (Section 6.6(b))

Required: See below

Actual:

 

A.    Aggregate value of liabilities of Borrower and its Subsidiaries (including
all Indebtedness) and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower (but no other Subordinated Debt)    $             B.   
Aggregate value of Indebtedness of Borrower subordinated to Borrower’s
Indebtedness to Bank    $             C.    Debt (line A minus line B)   
$             D.    Aggregate value of total assets of Borrower and its
Subsidiaries    $             E.    Aggregate value of goodwill of Borrower and
its Subsidiaries    $             F.    Aggregate value of intangible assets of
Borrower and its Subsidiaries    $             G.    Aggregate value of any
reserves not already deducted from assets    $             H.    Value of line C
   $             I.    Tangible Net Worth (line D minus line E minus line F
minus line G minus line H)    $            

Is line I greater than or equal to: (i) $20,000,000 for the quarters ending
March 31, 2009, through September 30, 2009; or (ii) $25,000,000 for the quarters
ending December 31, 2009 and thereafter?

 

             No, not in compliance

               Yes, in compliance

 

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EXHIBIT F

BORROWING BASE CERTIFICATE

Borrower: ISTA Pharmaceuticals, Inc.

Lender: Silicon Valley Bank

Commitment Amount: $25,000,000

 

ACCOUNTS RECEIVABLE    1.   

Total Accounts Receivable as of                     

   $             2.   

Less Ineligible Accounts Receivable

   $             3.   

TOTAL Eligible Accounts Receivable (#1 minus #2)

   $             4.   

Eighty percent (80%) of Eligible Accounts Receivable

   $             5.   

Net Cash as of                     

   $             6.   

Twenty-five percent (25%) of Net Cash

   $             7.   

Maximum Loan Amount (lesser of (a) $25,000,000 and (b) #4 plus the lesser of
(X) $5,000,000 million and (Y) #6)

   $             8.   

Present balance owing on Line of Credit

   $             9.    Amounts outstanding or reserved under Letter of Credit
Sublimit, FX Reserve and Cash Management Services Sublimit    $             10.
  

#8 plus #9

   $             11.   

LOAN AVAILABILITY (#7 minus #10)

   $            

The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.

 

COMMENTS:              BANK USE ONLY             Received by:   

 

By:   

 

           AUTHORIZED SIGNER    Authorized Signer         Date:     

 

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