Exhibit 10.1

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement (the “Agreement”) is entered into as of
March 30, 2012, 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 an Amended
and Restated Loan and Security Agreement, dated February 23, 2011 (as may be
amended from time to time the “Loan Agreement”). Capitalized terms used but not
otherwise defined herein shall have the same meanings as in the Loan Agreement.

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral.

3. DESCRIPTION OF CHANGE IN TERMS.

 

  A. Modification to Loan Agreement.

 

  1. Notwithstanding anything to the contrary in the Loan Agreement or any other
Loan Document, and subject to the satisfaction of the conditions to the
effectiveness of this Agreement:

 

  (i) the Letters of Credit Sublimit, Foreign Exchange Sublimit and Cash
Management Services Sublimit, and the obligation of Bank to make any Credit
Extensions or issue any Letters of Credit under the Loan Agreement in respect
thereof, is hereby terminated;

 

  (ii) Borrower’s right to request Credit Extensions and/or Letters of Credit in
connection with the Letters of Credit Sublimit, Foreign Exchange Sublimit and
Cash Management Services Sublimit under the Loan Agreement is hereby terminated;
and

 

  (iii) Section 2.2.2 (Letters of Credit Sublimit), Section 2.2.3 (Foreign
Exchange Sublimit) and Section 2.2.4 (Cash Management Services Sublimit), all
references to the Letters of Credit Sublimit, Foreign Exchange Sublimit, and
Cash Management Services Sublimit in any definition or provision in the Loan
Agreement (including any exhibits thereto) or any other Loan Document, and all
definitions and provisions relating solely to the Letters of Credit Sublimit,
Foreign Exchange Sublimit, and Cash Management Services Sublimit in the Loan
Agreement (including any exhibits thereto) and each other Loan Document are of
no further force or effect.

 

  2. The termination of the Letters of Credit Sublimit, Foreign Exchange
Sublimit and Cash Management Services Sublimit as set forth herein shall not be
deemed to (i) be a termination or modification of any other term or condition of
the Loan Agreement or any Loan Document, or (ii) prejudice any right or remedy
which Bank may now have or may have in the future (except to the extent such
right or remedy which Bank may now have or may have in the future is based upon
an Event of Defaults that was waived in writing by Bank) under or in connection
with the Loan Agreement or any Loan Document.

 

  3. Notwithstanding the termination of the Letters of Credit Sublimit, Foreign
Exchange Sublimit and Cash Management Services Sublimit as set forth herein, any
obligation incurred by Borrower in respect of the Letters of Credit Sublimit,
the Foreign Exchange Sublimit or the Cash Management Services Sublimit, or
hereafter incurred by Borrower in respect of any separate facility relating to
letters of credit, cash management services or foreign exchange contracts, shall
constitute part of the Obligations under the Loan Agreement and be secured by
the Loan Documents.

 

1

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

  4. Clause (b) of Section 2.2.1 (Revolving Advances) is hereby deleted in its
entirety and replaced with the following:

(b) Termination; Repayment. The Revolving Line terminates on the earlier of
(i) the Prepayment Date, or (ii) 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.

 

  5. The following clause (c) is hereby added to Section 2.2.1 (Revolving
Advances):

(c) Prepayment. So long as an Event of Default has not occurred and is not
continuing, Borrower shall have the option to prepay, in whole, the Indebtedness
hereunder and terminate the Revolving Line, provided, Borrower (a) provides
written notice to Bank of its election to exercise to prepay at least three
(3) days prior to such prepayment, and (b) pays, on the date of the prepayment
(the “Prepayment Date”) (i) all accrued and unpaid interest with respect to the
outstanding principal amount of Advances through the Prepayment Date; (ii) the
aggregate principal amount of Advances outstanding as of the Prepayment Date;
(iii) the Make-Whole Premium; and (iv) all other sums, if any, that are due and
payable hereunder. The “Make-Whole Premium” is an amount equal to the Unused
Revolving Line Facility Fee calculated through the Revolving Line Maturity Date
and based on the unused portion of the Revolving Line being equal to the maximum
amount permitted thereunder.

 

  6. Clause (b) of Section 2.5 (Payment of Interest on Credit Extensions) is
hereby deleted in its entirety and replaced with the following:

(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, and
(b) 4.00 percentage points (400 basis points). Pursuant to the terms hereof,
interest on each Advance shall be paid in arrears on the first Business Day of
each month. 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.

 

  7. Clause (d) of Section 2.6 (Fees) is hereby deleted in its entirety and
replaced with the following:

(a) Make Whole Premium. The Make-Whole Premium when due pursuant to the terms of
Section 2.2.1(c).

 

  8. Clause (b), (c) and (d) of the definition of Eligible Accounts in
Section 13.1 (Definitions) are hereby deleted in their entirety and replaced
with the following:

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

 

2

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

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

(d) Credit balances over 90 days from due date;

 

  9. The definition of Prime Rate Margin in Section 13.1 (Definitions) is hereby
deleted in its entirety without replacement.

 

  10. The definitions of “Current Liabilities” and “Revolving Loan Maturity
Date” in Section 13.1 (Definitions) are hereby deleted in their entirety and
replaced with the following in alphabetical order:

“Current Liabilities”, as of any date of determination, 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 the
current portion of Borrower’s Total Liabilities that mature outside of one
(1) year.

“Revolving Line Maturity Date” is the earliest of (a) March 31, 2013; or (b) the
date Bank exercises its remedies under Section 9.1(a).

 

  11. Clauses (a) and (b) of Section 6.6 (Financial Covenants) are hereby
deleted in their entirety and replaced with the following:

(b) Adjusted Quick Ratio. 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 greater than or equal to: (i) 0.65 to 1.00
as of February 29, 2012, March 31, 2012, April 30, 2012, May 31, 2012, June 30,
2012, July 31, 2012 and August 31, 2012; (ii) 0.50 to 1.00 as of September 30,
2012, October 31, 2012 and November 30, 2012; and (iii) 0.75 to 1.00 as of
December 31, 2012 and the last day of each month thereafter.

(c) Tangible Net Worth. Borrower shall maintain, on a consolidated basis with
respect to Borrower and its Subsidiaries measured quarterly, Tangible Net Worth
of not less than: (i) $20,000,000 at March 31, 2012; (ii) $25,000,000 at
June 30, 2012; (iii) $5,000,000 at September 30, 2012; and (iv) $20,000,000 at
December 31, 2012 and the last day of each quarter thereafter.

 

  12. In furtherance of the amendment set forth in paragraph 11 above, Exhibit D
of the Loan Agreement is hereby deleted in its entirety and replaced with
Exhibit D attached hereto.

 

  B. Modification to Loan Documents. The Loan Documents are hereby amended
wherever necessary to be consistent with the changes to the Loan Agreement
described above.

4. NO DEFENSES OF BORROWER. Borrower agrees that, as of the date hereof, it has
no defenses against the obligations to pay any amounts arising under or in
connection with the Loan Documents.

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

6. REPRESENTATIONS AND WARRANTIES. Borrower hereby certifies that all
representations and warranties of Borrower contained in the Loan Agreement are
true, accurate and complete in all material respects as

 

3

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

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.

7. NO DEFAULT. Borrower hereby certifies no Default or Event of Default has
occurred and is continuing or of the date hereof, or would result after giving
effect to this Agreement.

8. CONDITIONS. The effectiveness of this Agreement is conditioned upon the
execution and delivery of this Agreement and the receipt by Bank of a loan
modification fee in the amount of Fifty Thousand Dollars ($50,000).

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:  

CFO & V.P., Corporate Development

  Title:  

Relationship Manager

 

4

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

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
Amended and Restated 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

 

Financial Covenant

  

Required

  

Actual

  

Complies

Maintain:          Adjusted Quick Ratio, Monthly    *Applicable ratio per below
           :1.0    Yes No Tangible Net Worth, Quarterly   
**Applicable amount per below    $            Yes No

 

* greater than or equal to (i) 0.65 to 1.00 as of February 29, 2012, March 31,
2012, April 30, 2012, May 31, 2012, June 30, 2012, July 31, 2012 and August 31,
2012; (ii) 0.50 to 1.00 as of September 30, 2012, October 31, 2012 and
November 30, 2012; and (iii) 0.75 to 1.00 as of December 31, 2012 and the last
day of each month thereafter.

 

** not less than (i) $20,000,000 at March 31, 2012; (ii) $25,000,000 at June 30,
2012; (iii) $5,000,000 at September 30, 2012; and (iv) $20,000,000 at
December 31, 2012 and the last day of each quarter thereafter.

 

5

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

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      Received by:   

 

        AUTHORIZED SIGNER By:  

 

   Date:    Name:      Verified:   

 

Title:         AUTHORIZED SIGNER      Date:         Compliance Status:   
        Yes         No

 

6

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

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                     

 

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

Required: See below

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    $ G.    Current Portion of Subordinated Debt and Current
Portion of long-term Indebtedness    $ H.    Current Liabilities (the sum of
lines E and F less G)    $ I.    Value of Line D (Quick Assets)    $ J.    Value
of Line H (Current Liabilities)    $ K.    Aggregate value of all amounts
received or invoiced by Borrower in advance of performance under contracts and
not yet recognized as revenue    $ L.    Line J minus line K    $ M.    Adjusted
Quick Ratio (line I divided by line L)   

Is line M equal to or greater than the applicable amount: (i) 0.65 to 1.00 as of
February 29, 2012, March 31, 2012, April 30, 2012, May 31, 2012, June 30,
2012, July 31, 2012 and August 31, 2012; (ii) 0.50 to 1.00 as of September 30,
2012, October 31, 2012 and November 30, 2012; and (iii) 0.75 to 1.00 as of
December 31, 2012 and the last day of each month thereafter?

 

             No, not in compliance

                Yes, in compliance

 

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 Warrant liability associated with the Deerfield Facility
Agreement) 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 and net (+or -) Warrant mark-to-market of Warrant associated with the
Deerfield Facility Agreement    $ 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)    $

 

7

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

Is line I greater than or equal to applicable amount: (i) $20,000,000 at
March 31, 2012; (ii) $25,000,000 at June 30, 2012; (iii) $5,000,000 at
September 30, 2012; or (iv) $20,000,000 at December 31, 2012 and the last day of
each quarter thereafter?

 

             No, not in compliance

                Yes, in compliance

 

8