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                                                                   Exhibit 10.14

              DISTRIBUTION, SUPPLY AND LICENSE AGREEMENT (FOREIGN)

         THIS AGREEMENT (the "Agreement"), made effective as of the 14 day of
April, 1997 (the "Effective Date"), by and between Oculex Pharmaceuticals,
Inc., a corporation incorporated under the laws of California, having its
principal offices at 639 North Pastoria Avenue, Sunnyvale, California
94086-2917 (hereinafter referred to as "Oculex") and Storz Instrument
Company, a corporation incorporated under the laws of the State of Missouri,
having its principal offices at 3365 Tree Court Industrial Drive, St. Louis,
Missouri 63122 (hereinafter referred to as "Storz");

                                 WITNESSETH:

         WHEREAS, Oculex is developing a proprietary drug delivery system for
use in delivering anti-inflammatory ophthalmic pharmaceutical agents to the
eye;

         WHEREAS, Oculex owns technical information and know-how relating to
the synthesis, manufacture, implantation, and utilization of such products;

         WHEREAS, Storz is interested in means for facilitating the use of
anti-inflammatory ophthalmic pharmaceutical products in cataract surgery or
in any other application for treating [*] in the [*] (hereinafter further
defined and referred to as the "Field");

         WHEREAS, Storz desires to purchase from Oculex, or a source
designated by Oculex and reasonably acceptable to Storz drug delivery
products in the Field made by and/or for and sold by Oculex or any
Third-Party Supplier, to secure from Oculex an exclusive license under
Oculex's patent rights and know-how and the exclusive right to distribute,
use and/or sell such products in the hereinafter defined Territory, and to
obtain a right of first refusal to expand the Field to include the use of
such products to deliver anti-bacterial ophthalmic pharmaceutical agents to
the eye, upon the fulfillment of certain conditions, all upon the terms and
conditions hereinafter provided; and

         WHEREAS, Oculex is willing to sell or have sold to Storz such
products and to grant such distribution right, licenses and right of first
refusal.

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Storz and Ocutex agree as follows:

SECTION 1.        DEFINITIONS

         As used in this Agreement, the following terms shall be deemed to
have the following meanings:
         1(a)     "Competing  Product"  shall  mean a product  for use in the
Field  that is not an Oculex Product and that is sold by Storz, its
sublicensee and/or Related Company in the Territory the sales of which, as
reported by a Sales Reporting Agency, equal or exceed twenty percent (20%) of
Storz or its sublicensee's and/or Related Company's sales of Oculex Products
in the Territory, as reported by such Sales Reporting Agency, during an
applicable calendar year.

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         1(b) "Exclusive Eye Implant Product" shall mean all Oculex Products
sold by Storz during an applicable period wherein sales of implant products
by third parties in the Field and in the Territory as reported by a Sales
Reporting Agency for such applicable period do not exceed twenty percent
(20%) of sales of the Oculex Products by Storz and its sublicensees in the
Territory during such applicable period as reported by such Sales Reporting
Agency.

         1(c) "FDA Equivalent" shall mean that agency or collective agencies
of a country of the Territory that is the counterpart of the United States
Food and Drug Administration for such country responsible for approval of
pharmaceuticals and/or medical devices, as applicable, for products such as
Oculex Products hereunder.

         1(d) "Field" shall mean the use of anti-inflammatory ophthalmic
pharmaceutical agents in cataract surgery, or in any other application, for
treating an [*] in the [*].

         1(e) "GMP Equivalent Audit" shall mean an assessment of (i) Oculex's
and/or any Third-Party Supplier's (as defined hereinafter) compliance with
Good Manufacturing Practice for Pharmaceuticals: General, as set forth in
Title 21 United States Code of Federal Regulations, Part 211, and elsewhere,
as well as any applicable similar regulations of any relevant foreign
governments and/or general industry practices and (ii) the effectiveness of
Oculex's and/or any such Third-Party Supplier's quality assurance programs in
effect at the time concerned.

         1(f) "Licensed Know-how" shall mean any and all data, technology,
drawings, documentation and other proprietary and confidential information
which relates to Oculex Products and is owned, controlled or licensed by
Oculex (with the right to grant sublicenses) on the effective date or during
the term of this Agreement.

         1(g) "Licensed Patent Rights" shall mean (i) the patents and patent
applications identified in the Section II of Appendix A attached hereto; (ii)
any divisional, continuation, continuation-in-part (to the extent such
continuation-in-part applications claim subject matter disclosed in a patent
application or patent included in (i) or (ii) of this Paragraph l(h)), or
substitute patent applications of any such applications; (iii) any patent
applications in any country of the Territory, as hereinafter defined, filed
by Oculex on the Licensed Inventions or counterpart of or corresponding to
the United States patents and patent applications identified in Section I of
Appendix A attached hereto, in any country of the Territory, including,
without limitation, those patents and patent applications identified in
Section II of Appendix A attached hereto; (iv) any patents which shall issue
on any of the above-described patent applications; and (v) any reissues,
reexaminations and extensions of the above, which patent rights identified in
subparagraphs (i) -(v) herein are owned, controlled by or licensed to Oculex
(with a right to sublicense) on the Effective Date or during the term of this
Agreement, and which relate to Oculex Products. Oculex, at the written
request of Storz, will update Appendix A to reflect the then-current list of
Licensed Patent Rights, but no more than twice annually.

         1(h)     "Licensed Product", singular or plural, shall mean:

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          (i)              any product useful in the Field and in any country of
                           the Territory claimed in any pending claim in any
                           pending patent application of the Licensed Patent
                           Rights in or for said country, or claimed in one or
                           more valid, enforceable claims in one or more
                           unexpired patents of the Licensed Patent Rights in or
                           for said country, or

          (ii)             any product useful in the Field and in any country of
                           the Territory employing, or intended to be utilized
                           employing, a process or method claimed in any pending
                           claim in any pending patent application of the
                           Licensed Patent Rights in or for said country, or
                           claimed in one or more valid, enforceable claims in
                           one or more unexpired patents of the Licensed Patent
                           Rights in or for said country.

         1(i) "Major European Country", singular or plural, shall mean one or
all, as applicable, of the European countries of Belgium, France, Germany,
Great Britain and The Netherlands.

         1(j) "NDA Equivalent" shall mean an application equivalent to an NDA
as defined in the United States Food, Drug and Cosmetic Act and applicable
regulations promulgated thereunder, made to an FDA Equivalent of any country
of the Territory, the filing of which is necessary to commence commercial
sale of Oculex Product in such country.

         1(k) "Net Sales" shall mean the total or gross billings for sales or
other transfers of Oculex Products by Storz, its sublicensees and/or any
Related Companies, as hereinafter defined, in any arm's-length transactions
to unrelated third-party distributors, retailers or end users, less the
following deductions where factually applicable: (i) discounts and rebates
allowed to and taken by third parties, in amounts customary to the trade;
(ii) outbound transportation and insurance charges; (iii) special outbound
packing; (iv) sales, excise, use, turnover, inventory, value-added and
similar taxes and/or duties imposed upon sales of Oculex Products, but not
including net income tax; and (v) replacements in amounts refunded or
credited upon purchase price on returned or defective Oculex Products. Sales
shall be accounted for when invoiced and credits and refunds shall be
accounted for when allowed. As used herein, the word "sublicensee", singular
or plural, shall mean a sublicensee of any Of the rights granted to Storz
hereunder.

         1(l) "Oculex Product", singular or plural, shall mean any drug
delivery product for use in the Field, including without limitation Licensed
Products, made by or for and/or sold or otherwise transferred (i) by Oculex
or any Third-Party Supplier, or (ii) if Storz exercises its option under
either Section 5(d) or 5(e), by Storz or any Storz Additional Source.

         1(m) "Potential Field" shall mean the use of [*] ophthalmic
pharmaceutical agents in [*], or any other application, for treating an [*]
in the [*].

         1(n) "Process Validation" shall mean establishment of documented
evidence which provides a high degree of assurance that a specific process
conducted by Oculex and/or any Third-Party Supplier, will consistently
produce a particular Oculex Product meeting the Specification for such Oculex
Product and quality

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attributes for that Oculex Product, in accordance with the FDA document
entitled "General Principles of Process Validation", and other FDA documents
and regulations, and any applicable similar regulations of any relevant
foreign governments.

         1(o) "Proprietary Information" shall mean, subject to the limitations
set forth in Section 12 hereof, all information received by a party hereto
pursuant to this Agreement from the other party. In particular, Proprietary
Information shall be deemed to include, but not be limited to, any patent
application or drawing, any trade secret, information, invention, idea, sample
of assay components, process, formula or test data relating to any research
project, work in process, future development, engineering, manufacturing,
regulatory, marketing, servicing, financing or personnel matter relating to the
disclosing party, its present or future products, sales, suppliers, clients,
customers, employees, investors or business, whether in oral, written, graphic
or electronic form.

         1(p) "Related Company", singular or plural, shall mean a corporation,
partnership, trust or other entity that directly, or indirectly through one or
more intermediates, controls, is controlled by or is under common control with a
party to this Agreement. For such purposes, "control", "controlled by" and
"under common control with" shall mean the possession of the power to direct or
cause the direction of the management and policies of an entity, whether through
the ownership of voting stock or partnership interest, by contract or otherwise.
In the case of a corporation, the direct or indirect ownership of at least fifty
percent (50%) of its outstanding voting shares (or, for countries limiting
foreign ownership to forty percent (40%) or more, direct or indirect ownership
of more than forty percent (40%)) shall in any event be deemed to confer
control, it being understood that the direct or indirect ownership of a lesser
percentage of such shares shall not necessarily preclude the existence of
control.

         1(q) "Sales Reporting Agency" shall mean reports published by a
mutually acceptable private or governmental agency or organization (for in
example in the United States, the Hospital/Laboratory Database Division of IMS
America, Plymouth Meeting, Pennsylvania 19462-1048 in its publication "Hospital
Supply Index: Product Analyses") of end-user or dealer sales of pharmaceutical
products and/or medical devices in the Territory.

         1(r) "Sample  Cost" shall mean the cost to Oculex to supply  Samples
to Storz,  including the direct cost of labor,  materials,  shipping and
overhead solely associated with manufacturing  Samples. No profit or general
corporate overhead may be included in Sample Cost.

         1(s) "Second Source" shall mean a source of Oculex Products approved by
the FDA Equivalent for at least the Major European Countries as an alternative
or additional source of Oculex Products for order by Storz for sale in the
Territory which is designated by Oculex as a Third Party Supplier of Oculex
Products other than the source of Oculex Product first approved by the relevant
FDA Equivalents hereunder.

         1(t) "Specifications" shall mean those specifications for a particular
Oculex Product, including any quality assurance protocols agreed upon by the
parties hereto. The Specifications for the first Oculex Product to be supplied
hereunder are attached hereto and incorporated herein as Appendix B. The
Specifications for

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subsequent Oculex Products will be attached to Appendix B when the parties
mutually agree upon such Specifications. Any modifications of the
Specifications for any Oculex Product shall be effective when approved and
signed by both parties hereto. The parties agree that neither party may
unreasonably withhold its agreement to changes in any Specifications
necessitated by FDA requirements.

         1(u) "Territory" shall mean Canada, Republic of South Africa and the
countries of Europe (including without limitation the countries of western
Europe, eastern Europe and the former Union of Soviet Socialist Republics).

         1(v) "Third Party Supplier" shall mean any third party designated by
Oculex as a FDA Equivalent approved supplier of Oculex Products for each
country of the Territory in which FDA Equivalent approval has been granted.

         1(w) "Unit  of  Oculex  Product"  shall  mean  an  Oculex  Product
supplied  to  Storz,  its sublicensee  and/or Related  Company under this
Agreement in a dose approved by the FDA Equivalent for the country of sale of
the Territory for a single application in the eye.

SECTION 2.    INITIAL AND DEVELOPMENT MILESTONE PAYMENTS AND RELATED MATTERS

         2(a) INITIAL PAYMENT: Within thirty (30) days following execution of
this Agreement, Storz will pay to Oculex the sum of [*] as a license fee in
full consideration for the license to utilize the Licensed Know-how granted
in Paragraph 4(a) hereof.

         2(b) MILESTONE PAYMENTS: Upon satisfactory completion by Oculex, and
receipt by Storz of documentation evidencing such completion, of the
following milestones during the term of this Agreement (hereinafter referred
to as "Milestones"), Storz shall pay to Oculex by the dates for payment
indicated below (hereinafter referred to as "Milestone Payment Dates") the
sums (hereinafter referred to as "Milestone Payments") set forth in the
following schedule for the particular purpose indicated for each Milestone
(i) and (ii):

         (i)      APPROVAL  MILESTONE:  Within thirty (30) days following
                  delivery and acceptance by Storz of Oculex  Product in the
                  amount  ordered in the Initial Order  following the
                  applicable countries' FDA Equivalent's  earliest NDA
                  Equivalent  approval of the Oculex Product for a total of
                  [*]  countries  of the Major  European  Countries,
                  Storz  will make a Milestone Payment in accordance with the
                  following  schedule,  based on demonstration in well
                  controlled  phacoemulsification-technique  cataract
                  surgery trials  available to support a claim under
                  regulatory  requirements in the [*] Major European
                  Countries that:

                  (a)      the Oculex Product is [*] more [*] than [*] with
                           [*] or [*] than normally associated with [*]:

<TABLE>
<CAPTION>
                                       DATE OF APPROVAL                                AMOUNT
                                       ----------------                                ------
                                       <S>                                             <C>
                                       [*]                                              [*]
                                       [*]                                              [*]
                                       [*]                                              [*]
</TABLE>

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                  or, if (a) is not satisfied, then

                  (b)      the Oculex Product is [*] more [*] than [*] with
                           [*] or [*] than normally associated with [*]:

<TABLE>
<CAPTION>
                                       DATE OF APPROVAL                                AMOUNT
                                       ----------------                                ------
                                       <S>                                             <C>
                                       [*]                                             [*]
                                       [*]                                             [*]
</TABLE>

         or, if (b) is not satisfied, then

                  (c)      the Oculex Product does not meet minimum
                           requirements under this Paragraph 2(b)(i) and [*].

                  In the event that Oculex demonstrates that the Oculex
                  Product is [*] more [*] than [*] under 2(b)(i)(b) and
                  receives the Milestone Payment specified therein, but
                  thereafter and within the time frames set forth under
                  2(b)(i)(a) Oculex demonstrates that the Oculex Product is
                  [*] more [*] than [*] under 2(b)(i)(a), Storz will pay the
                  difference between the amount paid under 2(b)(i)(b) and the
                  amount due under 2(b)(i)(a) within thirty (30) days following
                  Storz' receipt of documentation evidencing such result.
                  However, in no event shall any payment under 2(b)(i)(b) be
                  payable hereunder after a payment under 2(b)(i)(a).

         (ii)     APPROVAL ROYALTY  PRE-PAYMENT  MILESTONE:  Within thirty
                  (30) days following delivery by Oculex and  acceptance by
                  Storz of Oculex  Product in the amount  ordered in the
                  Initial Order  following the  applicable  countries'  FDA
                  Equivalent's  earliest NDA Equivalent approval  of the
                  Oculex  Product  for a total  of  [*]  countries  of
                  the  Major European  Countries,  Storz will make a
                  Milestone  Payment to Oculex in accordance  with the
                  following  schedule if, based on the approval of the claims
                  indicated,  Oculex has demonstrated in the clinical trials
                  specified in Paragraph 2(b)(i) that:

                  (a)      the  Oculex  Product  is  [*]  more  [*]  than
                           [*] with [*] or [*] than normally associated with
                           [*]:

<TABLE>
<CAPTION>
                                       DATE OF APPROVAL                                AMOUNT
                                       ----------------                                ------
                                       <S>                                             <C>

                                       [*]                                             [*]
                                       [*]                                             [*]
</TABLE>

                  or, if (a) is not satisfied, then

                  (b)      the Oculex Product is [*] more [*]
                           than [*] with [*] or [*]
                           than normally associated with [*]:

<TABLE>
<CAPTION>
                                       DATE OF APPROVAL                                AMOUNT
                                       ----------------                                ------
                                       <S>                                             <C>
                                       [*]                                             [*]
                                       [*]                                             [*]
</TABLE>

                  or, if (b) is not satisfied, then

                  (c)      the Oculex Product does not meet minimum requirements
                           hereunder under this Paragraph 2(b)(ii) and [*].

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                  In the event that Oculex demonstrates that the Oculex Product
                  is [*] more [*] than [*] under 2(b)(ii)(b) and receives the
                  Milestone Payment specified therein, but thereafter and
                  within the time frames set forth under 2(b)(ii)(a) Oculex
                  demonstrates that the Oculex Product is [*] more [*] than [*]
                  under 2(b)(ii)(a), Storz will pay the difference between the
                  amount paid under 2(b)(ii)(b) and the amount due under
                  2(b)(ii)(a) within thirty (30) days following Storz' receipt
                  of documentation evidencing such result. However, in no event
                  shall any payment under 2(b)(ii)(b) be payable hereunder after
                  a payment under 2(b)(ii)(a). Any payment under this Paragraph
                  2(b)(ii) will be deductible from earned royalty/product
                  payments on Net Sales throughout the Territory until recovered
                  in full, but in no event will deductions from any individual
                  quarterly earned royalty/product payment exceed [*] of the
                  calculated earned royalty/product payments payable for Net
                  Sales during the quarter concerned.

         (iii)    EFFECT OF TERMINATION ON MILESTONE PAYMENTS: Storz shall not
                  be obligated to pay any sum payable under this Paragraph 2(b)
                  if prior to the Milestone Date set forth in this Paragraph
                  2(b) for the Milestone concerned, either party hereto has
                  given notice of termination under any provision of this
                  Agreement.

SECTION 3.        APPOINTMENT AND SALE OF LICENSED PRODUCTS

         3(a) Oculex hereby appoints Storz as Oculex's exclusive distributor for
the Territory of Oculex Products in the Territory. Oculex will sell only to
Storz, its sublicensees and/or any Related Companies of Storz, or have sold by a
Third-Party Supplier only to Storz, its sublicensees and/or Related Companies of
Storz, Oculex Products conforming to the Specifications. In furtherance of the
exclusive distribution rights granted hereunder, Oculex agrees that it will not
sell to anyone other than Storz, its sublicensees and/or Related Companies, any
Oculex Product, including without limitation any Oculex Product including an
anti-inflammatory ophthalmic pharmaceutical agent(s) in addition to or in
combination with any other ophthalmic pharmaceutical agent or agents. Oculex
agrees, and will require any Third-Party Supplier to agree, not to knowingly
sell or otherwise transfer any Oculex Products to any third party for sale
and/or use in the Field in any country of the Territory. In recognition of the
exclusive licenses and the additional rights granted to Storz hereunder, Oculex
will exert reasonable efforts to deter the sale in the Territory, other than by
Storz, its sublicensees and/or Related Companies, of Oculex Products and/or
competitive products made by or for, or under license from, Oculex for permitted
sale in countries outside the Territory. Storz will exert reasonable efforts to
deter sale outside the Territory, other than by Oculex and/or its licensees, of
Oculex Products sold by Storz, its sublicensees and/or Related Companies within
the Territory.

         3(b) Oculex agrees to sell or have sold to Storz any sublicensees
and/or Related Companies, their full requirements of Oculex Products at the
prices set forth in Paragraph 3(e) hereof, shipped prepaid, within thirty

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(30) days after receipt of order, in bulk or packaged, according to the
Specifications, F.O.B. Storz' facility, on payment terms of net thirty (30)
days. Storz represents that after any necessary regulatory, pricing and
reimbursement approvals are obtained in a country of the Territory, Storz
will promote and market the Oculex Products in such country of the Territory
on a timely basis employing at least the same level of advertising, marketing
and promotion efforts in such country of the Territory that Storz employs
with respect to Storz' other drug products of comparable commercial
significance under similar circumstances in such country. Storz' obligations
to promote and market diligently Oculex Products pursuant to the preceding
sentence shall apply on a country by country basis within the Territory. Any
Oculex Product delivered by Oculex or any Third-Party Supplier to Storz under
this Agreement shall meet the Specifications and shall be labeled, packaged,
sterilized and ready for distribution for use in the Field in approved
countries of the Territory, as required under the Specifications for such
Oculex Product. Any Oculex Product delivered by Oculex to Storz under this
Agreement approved by the FDA Equivalent of a country of the Territory for a
maximum shelf life of more than two (2) years shall have on the date of
delivery of such Oculex Product to Storz (i) a remaining unelapsed shelf life
of at least two (2) years, and (ii) not more than six months of such FDA
Equivalent-approved maximum shelf life elapsed. Any Oculex Product delivered
by Oculex to Storz under this Agreement approved by the FDA Equivalent of a
country of the Territory for a maximum shelf life of two (2) years or less
shall have on the date of delivery of such Oculex Product to Storz not more
than three (3) months of such FDA Equivalent-approved maximum shelf life
elapsed.

         3(c) Storz and its sublicensees and/or Related Companies shall
purchase or have purchased from Oculex, or any Third-Party Supplier, their
full requirements of Oculex Products, except as provided in Paragraphs 3(d),
3(e) and 3(f) hereof. Storz shall place orders to Oculex or the Third-Party
Supplier designated by Oculex for a country of the Territory in which
FDA-Equivalent approval has been obtained. Storz will place its orders for
Oculex Products on Storz' standard Purchase Order Form attached hereto as
Appendix C. The terms and conditions printed on the reverse of such Purchase
Order are incorporated herein by reference, except where they are in conflict
with the terms of this Agreement, in which case the terms of this Agreement
shall prevail. Such orders will be placed by Storz at least quarterly for
delivery by Oculex or any Third-Party Supplier within sixty (60) days of
receipt of order by Oculex. Oculex shall promptly notify Storz of any event
or situation that could reasonably result in any inability of Oculex or its
Third-Party Supplier to any material extent to supply Oculex Product on or
before the delivery date requested in any purchase order or forecast
submitted by Storz hereunder.

         3(d) Within six (6) months following the submission by Oculex to the
FDA Equivalent of a particular country of the Territory of an NDA Equivalent
requesting approval of the Oculex Products for such country, Storz will
provide Oculex its reasonable estimate (hereinafter "Initial Forecast") of
Storz' requirements on a quarterly basis for the first year of supply of
Oculex Products and of samples of Units of Oculex Products (hereinafter
"Samples") for sale or other transfer in such country of the Territory
following approval of the NDA Equivalent by

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the FDA Equivalent concerned. Within thirty (30) days following Oculex's
delivery to Storz of a copy of a letter received by Oculex from the FDA
Equivalent indicating that the Oculex Product is approvable, Storz shall
place a binding purchase order (hereinafter "Initial Order") for Storz'
requirements of Oculex Products and Samples for the first calendar quarter
following Oculex's earliest receipt of approval for sale of such Oculex
Product in the country concerned. After submission of the Initial Order,
Storz may thereafter place further orders for FDA Equivalent-approved Oculex
Product(s), provided that Storz pays the royalty prepayment due to Oculex
pursuant to Paragraph 2(b)(ii) on a timely basis. Storz may submit orders and
forecasts for countries of the Territory for which the required regulatory
approvals have been obtained individually, or in any groups of geographically
associated countries, in the unfettered discretion of Storz. Oculex shall not
be obligated to supply in any quarter covered by the Initial Forecast for any
country of the Territory more than the quantity estimated for such quarter in
the Initial Forecast for such country.

         3(e) Except for Samples ordered by Storz, its sublicensees and/or
Related Companies from Oculex or any Third-Party Supplier designated by
Oculex, Storz, its sublicensees and/or Related Companies shall pay to Oculex
[*] per Unit of Oculex Product delivered to Storz (hereinafter referred to as
the "Product Supply Price"). Storz, its sublicensee and/or Related Company
shall pay to Oculex the Sample Cost of Oculex for manufacture and packaging
of such Samples ordered, subject to a on the number of Samples that Oculex or
a Third Party Supplier must supply of (i) [*] of amounts of Units of Oculex
Products included in the forecast for the first year immediately following
the date on which Oculex first delivers Oculex Products to Storz, and (ii) [*]
 of amounts of Units of Oculex Products included in the forecast for each
subsequent year during the term of this Agreement. For example, if Storz'
forecast provides that Storz requires [*]Units of Oculex Products in the
first year of the Agreement, Storz may order a maximum of [*] Samples in that
year under this Paragraph. Any Oculex Products purchased for use as Samples
in excess of the aforesaid limitations in any year during the term of this
Agreement shall be purchased at the Product Purchase Price.

         3(f) Following Storz' submission of its Initial Forecast, Storz will
thereafter provide to Oculex non-binding rolling forecasts of its anticipated
purchase requirements for Oculex Products and Samples of Storz, its
sublicensees and any Related Companies. Forecasts shall be due sixty (60)
days prior to the commencement of each calendar quarter and shall set forth
(i) Storz' actual requirements for the following quarter, which portion of
the forecast shall be binding, and serve as an order for Oculex Products and
Samples, and (ii) Storz' reasonable estimate of its requirements for the
following three (3) calendar quarters. Oculex shall deliver the Oculex
Products and Samples ordered for delivery by the delivery date specified
therein, but in no event shall Oculex be required to deliver more Oculex
Products in any given calendar quarter following the calendar quarters
covered by the Initial Forecast than: (i) [*] in excess of the amount that
was forecast for such calendar quarter in the forecast due five (5) months
prior to the beginning of the applicable calendar quarter, or (ii)

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[*] in excess of the amount that was forecast for such calendar quarter in
the forecast due either eight (8) months or eleven (11) months prior to the
beginning of the applicable calendar quarter.

         3(g) Within sixty (60) days following the date of the earliest FDA
Equivalent's earliest NDA Equivalent approval of the Oculex Product for at least
three (3) countries of the Major European Countries, Oculex will advise Storz in
writing of its intention to obtain such FDA Equivalent's approval of a Second
Source for such countries. Such Second Source may the same source as a Second
Source approved under any other agreement between the parties hereto relating to
the subject matter of the Licensed Patent Rights.

         3(h) Oculex and Storz shall each appoint a representative as a point of
contact for each company for information exchange and dispute resolution between
the parties during the development of the Oculex Products by Oculex. Each of the
parties shall pay the travel and related costs of its representative and/or
employees in connection with this Section 3(h). Oculex shall provide to Storz
access to, or copies of, Oculex's clinical data, and all applications to, or
correspondence with, governmental agencies in connection with regulatory
approval of Oculex Products and submissions and requests therefor, including
correspondence relating to clinical trials or marketing of Oculex Products,
which information shall be Proprietary Information of Oculex. Storz shall
likewise provide to Oculex access to any clinical data, and access to, or copies
of, all applications to, or correspondence with, any such government agencies in
connection with regulatory approval of Oculex Products, including all
correspondence relating to clinical trials or marketing of Oculex Products,
which information shall be Proprietary Information of Storz.

         3(i) Oculex, or any Third-Party Supplier, shall furnish Storz with a
written certificate for each lot of Oculex Products sold to Storz, its
sublicensee and/or any Related Company, stating that the Oculex Products in that
lot, identified by lot number, meet the Specifications. Storz, its sublicensee
and/or Related Company, within thirty (30) days of receipt of the Oculex
Products, shall have the right to reject any lots, cases or units which fail to
meet the Specifications. If Storz rejects Oculex Product it shall so advise
Oculex or any Third-Party Supplier of the reason for the rejection and shall not
pay the Product Supply Price therefor. Whether or not Oculex accepts Storz'
basis for rejection, promptly on receipt of a notice of rejection of Oculex
Product, Oculex shall use reasonable efforts at Storz' request to replace such
rejected Oculex Product. After notice of rejection is given, Storz shall
cooperate with Oculex in determining whether the rejected Oculex Products met
the Specifications. Storz will return to Oculex such portion of the allegedly
non-conforming batch of Oculex Product as Oculex may reasonably request for such
evaluation, accompanied by a written identification of the non-conforming
aspects of such Oculex Product. Oculex will evaluate the Oculex Product to
verify that such rejected Oculex Product does not conform to the Specifications,
and shall notify Storz as promptly as reasonably possible whether it accepts
Storz' basis for any rejection. If Oculex disagrees with Storz' determination
that certain Oculex Product does not meet the Specifications, such Oculex
Product shall be submitted to a mutually acceptable third party laboratory,
which shall determine whether such Oculex Product meets the Specifications. The
parties agree that such

                                     10

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exhibit

<PAGE>

laboratory's determination shall be final and determinative. If such
laboratory determines the rejected Oculex Product meets the Specifications
and is commercially marketable, Storz shall bear all costs billed by such
third party laboratory for such testing and the added costs of shipping the
quantities of such rejected product to such third party laboratory for
analysis, and if in its sole discretion Storz (i) determines to market such
formerly rejected Oculex Product, Storz shall pay Oculex the Product Supply
Price therefor, or (ii) decides not to market such rejected Oculex Product,
Storz shall reimburse Oculex for its fully loaded costs of manufacture of
such rejected batch of Oculex Product and Oculex's direct expense for
shipment thereof. If Storz determines to market formerly rejected Oculex
Product, Storz shall reduce its order for Oculex Product during the next
calendar quarter by the amount of such formerly rejected Oculex Product to
the extent such product has been replaced by Oculex as heretofore set forth
in this Paragraph 3(i). If such laboratory determines that the rejected
Oculex Product does not meet the Specifications and/or is not commercially
marketable, Oculex shall bear all costs billed by such third party laboratory
for such testing and shall reimburse Storz for the costs of returning the
rejected batch to Oculex or of disposing of the rejected batch, as specified
by Oculex. Cost of freight to return to Storz, its sublicensee and/or Related
Company the reworked or replaced lot will be prepaid by Oculex.

         3(j) Upon giving reasonable notice to Oculex, Storz, any representative
thereof, and/or any representatives of any United States or other domestic or
foreign governmental regulatory agency, shall have the right to inspect, during
normal business hours, the manufacturing areas of Oculex and/or any such
Third-Party Supplier which are involved in the production of the Oculex
Products, including any subcontractor(s) of Oculex or any such Third-Party
Supplier, to perform a GMP Audit or other regulatory or quality assurance
inspection, and to review records of Oculex and/or any such Third-Party Supplier
to assure compliance with any of the terms of this Agreement. Except as
otherwise required by law, the right to review records relating to manufacture
and/or costs of Oculex Product shall be limited to a period of three (3) years
after such manufacture and/or sale to Storz. Upon reasonable request by Storz,
Oculex or any Third-Party Supplier, will provide copies to Storz, at Storz'
expense, of any manufacturing, cost and/or quality control records associated
with the products being manufactured for Storz, its sublicensee and/or Related
Company, provided that Oculex will not be obligated to disclose any information
which is unrelated to Oculex Products or which is proprietary information of a
third party to which Oculex owes an obligation of confidentiality.

         3(k) Oculex agrees to reasonably assist Storz in the investigation of
any complaints involving the material, manufacture, quality or design of Oculex
Products.

         3(l) Storz shall include in its report of royalties due under this
Agreement for the fourth quarter of each calendar year the level of sales, if
any, by Storz, its sublicensees and/or Related Companies of any products in the
Field, other than Oculex Products, in the Territory during such calendar year.

         3(m) If at any time during the term of this Agreement, Storz is selling
any product that is implanted in the eye for use in the Field anywhere in the
Territory (an "Implant Product"), then Oculex may by written notice

                                      11
<PAGE>

advise Storz that Oculex intends to terminate this Agreement and the rights
and licenses herein granted unless within one hundred eighty (180) days
(hereinafter the "3(m) Notice Period")following receipt of such notice from
Oculex, Storz ceases selling such Implant Product. If Storz does not cease
selling such Implant Product within the 3(m) Notice Period, then Oculex may
by further written notice terminate this Agreement and all rights and
licenses granted hereunder effective upon Storz' receipt of such further
written notice from Oculex. Oculex must deliver such written notice of
intention to terminate to Storz under this Paragraph 3(m) not later than one
hundred twenty (120) days following the date on which Oculex first becomes
aware that Storz is selling such Implant Product.

         3(n) If prior to the date on which Oculex receives the first letter
from the FDA stating that the Oculex Product is approvable, Storz is selling
any product for use in the Field in the Territory that is not implanted in
the eye with calendar year net sales throughout the Territory greater than [*]
(a "Relevant Product"), then Oculex may by written notice advise Storz that
Oculex intends to terminate this Agreement and the rights and licenses herein
granted unless within one hundred twenty (120) days (hereinafter the "3(n)
Notice Period") following receipt of such notice from Oculex, Storz commits
in writing to cease selling such Relevant Product not later than one hundred
eighty (180) days following the date on which the FDA approves the first
Oculex Product for sale in each country of the Territory. If (i) Storz does
not make such commitment within the 3(n) Notice Period, or (ii) if Storz
makes such commitment within the 3(n) Notice Period but does not cease sales
of such Relevant Product in each such country within such one hundred eighty
(180) day period following the date on which the FDA approves the Oculex
Product for sale in such country, then Oculex may by further written notice
terminate all rights and licenses granted hereunder as to such country
effective upon Storz' receipt of such further written notice from Oculex.
Oculex must deliver any written notice of intention to terminate pursuant to
this Section 3(n) to Storz not later than one hundred twenty (120) days
following the date on which Oculex first becomes aware that Storz is selling
such Relevant Product in the country concerned.

         3(o) If at any time after the expiration of one (1) year following the
date on which Storz pays the amount due under Paragraph 2(b)(ii) hereof, Storz
is distributing or selling a Competing Product in a country of the Territory,
Oculex shall have the right to convert the exclusive rights and licenses granted
to Storz for such country of the Territory under this Agreement to nonexclusive
rights and licenses for the remaining term of this Agreement (the "Conversion
Option"), as follows: Oculex shall exercise it Conversion Option under this
Paragraph 3(o) by providing written notice to Storz of Oculex's intention to
exercise its Conversion Option terminate under this provision and Storz' failure
to cease such distribution and sale within one hundred twenty (120) days of its
receipt of such notice. Oculex must provide such notice of its exercise of its
Conversion Option under this Paragraph 3(o) within one hundred twenty (120) days
of the date on which Oculex first becomes aware that Storz is distributing or
selling a particular Competing Product in a particular country of the Territory,
or be deemed to have waived its rights under this Paragraph 3(0) as to such
country with respect to that Competing Product. Any

                                     12

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exhibit

<PAGE>

such conversion of Storz' rights and licenses under this Agreement from
exclusive to nonexclusive shall be effective upon further notice by Oculex to
Storz if Storz has not ceased it distribution and/.or sales of such Competing
Product in the country concerned within such one hundred twenty (120) day
period. The foregoing provisions of this Paragraph 3(0) notwithstanding,
Oculex shall have no right to exercise its Conversion Option during the one
year period immediately following payment of the amount due under Paragraph
2(b)(ii), and the one hundred twenty day period within which Oculex must give
such notice of intention to exercise its Conversion Option, shall not begin
under this Paragraph 3(0), for a period of one (1) year following the date on
which Storz pays the amount due under Paragraph 2(b)(ii) of this Agreement.

         3(p) If prior to the date upon which Oculex receives the first FDA
approval, Storz' merges with, is acquired by or otherwise transfers its business
unit to which this Agreement relates to a third party, Storz shall so notify
Oculex and if Oculex believes that such merger, acquisition or transfer may
materially impact Storz' ability to promote Oculex Products, then Oculex may by
written notice advise Storz that Oculex intends to terminate this Agreement and
the rights and licenses herein granted unless within one hundred twenty (120)
days following receipt of such notice from Oculex (hereinafter the "3(p) Notice
Period"), Storz can demonstrate to Oculex's satisfaction Storz' continued
ability to promote the Oculex Product at a level appropriate for the fulfillment
of Storz' obligations under Paragraph 3(b) after Oculex receives the FDA
approval of the Oculex Product. If Storz cannot demonstrate the foregoing within
the 3(p) Notice Period, then Oculex may by further written notice terminate this
Agreement and all rights and licenses granted hereunder effective upon Storz'
receipt of such further written notice from Oculex. In the event this Agreement
is terminated according to this Paragraph 3(p), Oculex shall refund to Storz
within ninety (90) days following the effective date of termination under this
Paragraph 3(p) the most recent single payment made to Oculex under either
Paragraph 2(a) or 2(b). Oculex must deliver any written notice of intention to
terminate under this Paragraph 3(p) to Storz not later than one hundred twenty
(120) days following the date on which Oculex receives notice of such merger,
acquisition or other transfer from Storz, or be deemed to have waived its rights
to terminate under this Paragraph 3(n). All payments under Section 2 which may
become due during the 3(p) Notice Period shall be deferred and will not become
due and payable until the earlier of (i) thirty (30) days following expiration
of the 3(p) Notice Period (ii) the date upon which the relevant payment becomes
due, if prior to the date such payment becomes due Storz receives notice from
Oculex that it will not exercise its option to terminate this Agreement pursuant
to this Paragraph 3(p), or (iii) the date upon which Storz receives notice from
Oculex that Oculex will not exercise its option to terminate this Agreement, if
the relevant payment had become due prior to Storz' receipt of such notice. In
the event Oculex terminates this Agreement according to this Paragraph 3(p), no
further payments shall be due and payable to Oculex pursuant to this Agreement.

                                      13
<PAGE>

SECTION 4. LICENSES GRANTED

         4(a) Oculex hereby grants to Storz and Storz hereby accepts a [*]
license, with the right to grant sublicenses, to utilize any Licensed
Know-how disclosed directly or indirectly to Storz in connection with this
Agreement in perpetuity to offer for sale, use and/or sell the Oculex
Products and any other products in the Field and in the Territory and to
manufacture, have manufactured and import the Oculex Products in the Field
and in the Territory in the event Storz obtains the right to manufacture the
Oculex Products pursuant to Section 5. Such license of Licensed Know-how
shall be exclusive for as long as the appointment of Storz as distributor of
Oculex Products in the Field and in the Territory made in Paragraph 3(a) of
this Agreement shall remain exclusive.

         4(b) Oculex hereby grants to Storz and Storz hereby accepts an
exclusive royalty-bearing license, with the right to grant sublicenses, under
the Licensed Patent Rights to offer for sale, use and/or sell the Licensed
Products in the Field only and in the Territory. The license granted hereunder
specifically excludes any license to manufacture Licensed Product, except as
specifically provided otherwise in Section 5 of this Agreement, and shall become
non-exclusive if the appointment of Storz as the distributor of Oculex Products
in the Field and in the Territory made in Paragraph 3(a) of this Agreement is
converted to non-exclusive pursuant to any provision of this Agreement.

SECTION 5.        ROYALTIES

         5(a) As further, ongoing consideration for the exclusive distribution
rights herein granted in Paragraph 3(a) and the license granted in Paragraph
4(b) hereof, Storz agrees to pay to Oculex an earned royalty on Net Sales during
each calendar quarter or portion thereof during the term of this Agreement, such
earned royalty to be calculated utilizing the royalty percentages specified in
this Section 5. Storz shall be entitled to offset in full against earned royalty
payable hereunder the total Product Supply Price paid by Storz for all Units of
Oculex Product on which Net Sales were reported for royalty calculation purposes
for the applicable quarter. Subject to the reductions in the earned royalties
set forth in Paragraph 5(b) below if the Oculex Product is not an Exclusive Eye
Implant Product, the royalty percentage to be used for such calculation of
earned royalty on Net Sales of Oculex Products in each country of the Territory
shall be determined from the tables set forth hereinafter, based upon the
particular U.S. dollar amount of actual cumulative Net Sales during the
applicable calendar year throughout the Territory and Storz' ability to promote
the alternative efficacy and side effect claims in the country concerned, as set
forth hereinafter:

          (i) if the Oculex Product has been demonstrated in well controlled
              phacoemulsification-technique cataract surgery trials as
              [*] more [*] than [*] with [*] or [*] than normally associated
              with [*], the percentage royalty payable by Storz on Net Sales
              during the applicable calendar quarter shall be based upon the
              cumulative Net Sales during

                                      14

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exhibit


<PAGE>

               the relevant calendar year during the term of this Agreement
               as follows, and in accordance with the instructions for
               calculating such percentage royalty described in Paragraph
               5(a)(iv):

<TABLE>
<CAPTION>
                    Cumulative Net Sales in Territory for Calendar Year           Percentage Royalty
                    ---------------------------------------------------           ------------------
                    <S>                                                           <C>
                    [*]                                                                   [*]
                    [*]                                                                   [*]
                    [*]                                                                   [*]
</TABLE>

     or, if (i) is not satisfied, then

          (ii) if the Oculex Product has been demonstrated in well controlled
               phacoemulsification-technique cataract surgery trials as
               [*] more [*] than [*] with [*] or [*] than normally
               associated with [*], the percentage royalty payable
               by Storz on Net Sales during the applicable calendar quarter
               shall be based upon the cumulative Net Sales during the
               relevant calendar year during the term of this Agreement as
               follows, and in accordance with the instructions for
               calculating such percentage royalty described in Paragraph
               5(a)(iv):

<TABLE>
<CAPTION>
                    Cumulative Net Sales in Territory for Calendar Year           Percentage Royalty
                    ---------------------------------------------------           ------------------
                    <S>                                                           <C>
                    [*]                                                                   [*]
                    [*]                                                                   [*]
                    [*]                                                                   [*]
</TABLE>

     or, if (ii) is not satisfied, then

         (iii) Oculex Product does not meet minimum requirements hereunder
               and [*] under this Section 5, [*] Storz shall [*] pay the
               Product Purchase Price specified in Paragraph 3(e) for each
               Unit of Oculex Product delivered under this Agreement.

         (iii) The percentage royalty to be utilized for a particular portion
               of Net Sales during an applicable calendar quarter shall be
               determined by first calculating the cumulative Net Sales from
               previous quarters during the applicable calendar year ("Prior
               Sales") and the Net Sales during the relevant calendar
               quarter for which an earned royalty is being calculated
               ("Current Sales"). Then, the earned royalty on Current Sales
               shall be calculated as follows:

               (1)  Determine the percentage royalty applicable to the
                    Current Sales, or separate portions thereof: First,
                    identify the range in the applicable table of Paragraph
                    5(a)(i) or 5(a)(ii) within which the Prior Sales falls,
                    and [*] the Prior Sales from the [*] of such range
                    ("Range Differential"). Then,

                                      15

[*] Confidential treatment requested with respect to certain portions of this
exhibit

<PAGE>

                    (a)  if the Current Sales are [*] or [*] the
                         Range Differential, the applicable Percentage
                         Royalty for all Current Sales shall be the
                         percentage royalty in the applicable table of
                         Paragraph 5(a)(i) or 5(a)(ii) corresponding to the
                         [*] in which the Prior Sales falls; or

                    (b)  if the Current Sales are greater than the Range
                         Differential, the applicable Percentage Royalty for
                         that portion of Current Sales equal to the Range
                         Differential shall be the percentage royalty in the
                         applicable table of Paragraph 5(a)(i) or 5(a)(ii)
                         corresponding to the range in which the Prior Sales
                         falls, and the applicable Percentage Royalty for
                         that portion of Current Sales [*] the Range
                         Differential shall be the percentage royalty in the
                         applicable table of Paragraph 5(a)(i) or 5(a)(ii)
                         corresponding to the next [*] of Cumulative Net
                         Sales in the same table of Paragraph 5(a)(i) or
                         5(a)(ii). In the unlikely event that the portion of
                         Current Sales [*] the Range Differential during a
                         calendar quarter [*] the difference between the [*]
                         and [*] of the [*] range, the percentage royalty
                         applicable to the amount of the Range Differential
                         [*] the [*] of the [*] range shall be the percentage
                         royalty corresponding to the [*] range.

               (2)  Once the applicable percentage royalty has been
                    determined, calculate the Total Earned Royalty for Net
                    Sales in the current calendar quarter for each portion
                    of Current Sales for which an applicable percentage
                    royalty was determined in accordance with 5(a)(iv)(1)(a)
                    or 5(a)(iv)(1)(b) by [*] each such identified
                    portion of Current Sales by the percentage rate
                    applicable thereto, and then sum all of the results of
                    such multiplication.

               (3)  Once the Total Earned Royalty on Net Sales has been
                    determined, calculate the Earned Royalty Payable by
                    [*] the number of units on which Current Sales
                    is based for the applicable calendar quarter by the
                    Purchase Price paid therefor under Paragraph 3(e), and
                    [*] the result from the Total Earned Royalty on Net
                    Sales in the current calendar quarter.

     Two illustrative examples of the calculation required under the various
potential circumstances of Paragraph 5(a)(i) are set forth in Exhibit D
attached hereto.

Such royalty payment due under this Paragraph 5(a) shall be mailed to Oculex
within sixty (60) days following the end of each calendar quarter concerned
for the term of this Agreement.

     5(b) If for two (2) consecutive calendar quarters, Oculex Product is not
an Exclusive Eye Implant Product, whether or not such Oculex Product is
covered by the Licensed Patent Rights (hereinafter referred to as

                                      16

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exhibit

<PAGE>

an "Non-EEIP Event"), then effective with the quarter in which either party
hereto notifies the other party in writing that such Non-EEIP Event has
occurred, the corresponding percentage rate used to calculate any earned
royalty/product payment set forth in Paragraph 5(a) above shall be [*]
percentage points if 5(a)(i) applies or [*] percentage points if 5(a)(ii)
applies for the Territory for such calendar quarter, such reduction to remain
in effect until Oculex Product is an Exclusive Eye Implant Product, whether
or not such Oculex Product is covered by the Licensed Patent Rights, for any
two (2) consecutive calendar quarters following the calendar quarter in which
such notice of the Non-EEIP Event was given, in which event the corresponding
percentage rate used to calculate any earned royalty/product payment set
forth in Paragraph 5(a) above shall be restored to its otherwise appropriate
level for the Territory under the other terms of this Agreement.

     5(c) If (i) Oculex advises Storz that Oculex does not intend to qualify
a Second Source in the required number of countries; or (ii) Oculex advises
Storz that Oculex intends to qualify a Second Source in such countries but in
fact fails to initiate and diligently pursue qualification of a Second
Source, or (iii) Oculex in any event fails to qualify a Second Source in such
countries within three (3) years following the date that Storz receives such
written advice from Oculex, then Storz shall have the right to select a
Second Source acceptable to Oculex, which acceptance shall not be
unreasonably withheld, and Oculex shall take such steps as are necessary,
including without limitation any transfer of know-how, regulatory approvals
and information and grant of licenses, to qualify such Second Source to
manufacture and supply Oculex Products hereunder as a Third-Party Supplier.

     5(d) If for any reason Oculex or any Third-Party Suppliers are unable to
supply at least [*] of the full requirements of Storz, its sublicensees
and/or Related Companies for Oculex Products throughout the Territory in
accordance with Section 3 hereof for [*] during the term of this Agreement,
then Storz, its sublicensees and/or Related Companies shall have the right
upon written notice to Oculex, to manufacture or import, or have manufactured
by any additional source selected by Storz (hereinafter referred to as "Storz
Additional Source"), the total requirements for Oculex Products throughout
the Territory for the remaining term of this Agreement for Storz, its
sublicensees and/or Related Companies, and Storz will be relieved of its
obligation to purchase its requirements of Oculex Product from Oculex or its
Third Party Supplier. In the event that Storz exercises its right to
manufacture or appoint a Storz Additional Source under this Paragraph 5(d),
earned royalty/product payments set forth in Paragraphs 5(a) and 5(b), as
applicable, payable on Net Sales of any Oculex Products not supplied by
Oculex or a Third-Party Supplier shall be [*] set forth in Subparagraphs
5(a)(i) and 5(a)(ii) throughout the Territory for the remaining term of this
Agreement.

     5(e) If for any reason Oculex (i) fails to file an NDA Equivalent in the
required number of countries of the Major European Countries by January 1,
2000, or (ii) Oculex ceases to diligently pursue obtaining regulatory
approvals for the Territory, or (iii) Oculex declares bankruptcy, then Storz
and its sublicensees and/or Related Companies shall have the right upon
ninety (90) days prior written notice to Oculex, to manufacture, or have

                                      17

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exhibit
<PAGE>

manufactured by a Storz Additional Source, the total requirements for Oculex
Products of Storz, its sublicensees and/or Related Companies throughout the
Territory for the remaining term of this Agreement to the exclusion of
Oculex. In the event that Storz exercises its right to exclusively
manufacture or appoint a Storz Additional Source under this Paragraph 5(e),
the earned royalty/product payments set forth in Paragraphs 5(a) and 5(b), as
applicable, payable on Net Sales of any Oculex Products not supplied by
either Oculex or a Third-Party Supplier shall be [*] regardless of the
Cumulative Net Sales in the Territory for the Calendar Year concerned
throughout the Territory for the remaining term of this Agreement.

     5(f) In the event Storz exercises its option to exclusively manufacture
under Paragraph 5(d) or 5(e) hereof, Oculex shall have no right to
manufacture Oculex Products for itself or any third party for sale anywhere
in the Territory for the remaining term of this Agreement. In addition to the
exclusive rights to use, offer for sale and sell Oculex Products (including
without limitation the Licensed Products) and to use any Licensed Know-how
disclosed to Storz to use, offer to sell and sell Oculex Products granted in
Paragraphs 4(a) and 4(b), effective upon the written notice by Storz to
Oculex required under Paragraph 5(d) or 5(e) hereof, Oculex shall grant to
Storz the additional exclusive right and license to manufacture, have
manufactured and import Oculex Products under the Licensed Patent Rights and
under the Licensed Know-how. To facilitate such manufacturing, Oculex will
promptly transfer to Storz the Licensed Know-how and any other information
and/or knowledge (including without limitation any trade secrets relating to
manufacture and packaging of Oculex Products), grant to Storz a right of
reference to all regulatory and other governmental approvals and filings
required to make, package, sterilize and/or import Oculex Product or
components thereof, to execute all documents and amendments to this Agreement
necessary to grant the rights and licenses required under this Paragraph
5(f), and otherwise cooperate and assist Storz without additional
compensation, to the extent necessary to enable Storz to commercially
manufacture in production quantities, or have manufactured, the Oculex
Products in a timely manner to meet the full requirements of Storz, its
sublicensees and/or Related Companies for Oculex Products for the remaining
term of this Agreement. Oculex's obligations under this Paragraph 5(f) shall
survive any termination of this Agreement by Storz under Section 16 hereof or
expiration of this Agreement under Section 15 hereof, wherein prior to the
effective date of such termination or expiration Storz has given notice of
its election to exercise Storz' option under Paragraph 5(d) or 5(e) hereof.

SECTION 6. ROYALTY CALCULATION, REPORTS AND RECORDS

     6(a) Storz agrees, and will require any Sublicensees and any Related
Companies to agree, to keep true and accurate records adequate to establish
any royalty or other amount payable under this Agreement and to permit an
independent certified public accountant selected by Oculex and reasonably
acceptable to Storz, to inspect, on a confidential basis and at Oculex's
expense, said records once annually at reasonable times upon reasonable
notice, but only within a period of three (3) years after the royalty period
to which such records relate. Storz shall provide to Oculex calendar
quarterly reports of earned royalty due and payable on Net Sales, if any, of

                                      18

[*] Confidential treatment requested with respect to certain portions of this
exhibit

<PAGE>

Storz, its sublicensees and/or any Related Companies of Oculex Products in
the immediately preceding calendar quarter, which reports shall be mailed to
Oculex within forty-five (45) days after the end of each calendar quarter,
accompanied by payment of all amounts shown to be so due and payable, if any.
Any payment payable under Sections 5 and 6 hereof shall be made to a banking
institution designated by Oculex by check or wire or electronic transmission,
as Oculex may direct from time to time, in legal tender of the United States
of America. In the event that an audit of Storz records under this Paragraph
6(a) should reveal an underpayment of earned royalty on Net Sales for any
calendar quarter otherwise due and payable under this Agreement that exceeds
[*] of the total amount actually paid by Storz, then Storz shall reimburse
Oculex for the direct expense to Oculex for such audit insofar as such
expenses relate to the audit of the calendar quarter or quarters for which
such under payment in excess of [*] occurred.

     6(b) Earned royalty, as provided in Section 5 hereof, shall begin to
accrue upon the first commercial sale of Oculex Product by Storz, its
sublicensee and/or Related Company to an unrelated third-party distributor,
retailer or end user.

     6(c) Only a single royalty under Section 5 hereof shall be payable
to Oculex for each specific Unit of Oculex Product regardless of the number
of countries in which manufacture, importation, sale, resale and/or use of
such Units of Oculex Product is made by Storz, its sublicensees, any Related
Companies and/or any direct or indirect customer thereof.

     6(d) Royalty and other payments due to Oculex under this Agreement shall
accrue in the national currency of the country of sale by Storz, its
sublicensee or any Related Company, to an unrelated third-party distributor,
retailer or end user. If Oculex's country of residence, as indicated by
Oculex's mailing address designated on page 1 of this Agreement, is different
from such country of sale, then, if the laws or regulations of the relevant
countries so permit, such royalty and other payments shall be converted into
and paid in the equivalent value in the currency of the country of Oculex's
residence at the applicable rate of exchange for such payments existing on
the day of remittance. Storz shall file such transfer applications and other
papers as may be required with the competent authorities to secure the
transfer and conversion within the time stipulated hereunder for the payment
of royalty or other amounts due to Oculex by the use of any lawful method as
may be specified in writing by Oculex for such purpose, provided same is in
conformity with the laws and regulations of the relevant countries subject to
the terms and conditions of Paragraph 6(e) of this Agreement. Oculex agrees
to accept as royalty payments any such payments from any sublicensee of Storz
directly to Oculex, in lieu of such payments from Storz, provided that Storz
remains fully liable for such payment in the event of non-payment by such
sublicensee.

     6(e) In the event that Storz or any sublicensee is prevented from
remitting to Oculex any payments owing to Oculex in the currency designated
in Paragraph 6(d) hereof by reason of any statutes, laws, codes or government
regulations, or the unavailability of such currency, then such payments may
be paid by depositing

                                      19

[*] Confidential treatment requested with respect to certain portions of this
exhibit

<PAGE>

them in the currency in which such payments accrued to the account of Oculex
in a bank reasonably acceptable thereto. If the statutes, laws, codes or
government regulations should prohibit both remittance and bank deposit of
such payments, then the obligation to pay, deposit, accrue or otherwise
account for such payments shall be suspended for so long as said prohibition
shall be in effect, unless otherwise mutually agreed.

     6(f) All taxes, assessments and fees of any nature levied by any
governmental entity in the Territory of this Agreement on the sale of
Licensed Products by Storz, any Storz Sublicensee or any Related Company
shall be paid by Storz, its sublicensee or any Related Company for its
account. However, if an income or other tax is levied on the recipient of any
royalty under this Agreement by any governmental entity and is legally
required to be withheld from the payment of royalty from Storz or any Storz
Sublicensee to Oculex or from any Storz Sublicensee and/or Related Company to
Storz, such tax shall be paid by Storz, its sublicensee and/or Related
Company for the account of Oculex, in which event an official receipt will be
secured evidencing such payment, the receipt forwarded to Oculex, and the
amount of such tax deducted from royalty paid to Oculex.

SECTION 7. RIGHT OF FIRST REFUSAL

     In the event that the definition of "Field" in any agreement between the
parties relating to the distribution of Oculex Product outside the Territory
is expanded to include the Potential Field, the definition of Field in this
Agreement shall be automatically and without further or additional notice
under this Agreement expanded to include the Potential Field, and the
definitions of Oculex Products and Licensed Products, along with any other
definitions, rights and obligations of either party under this Agreement that
are related to or dependent upon the definition of Field shall be expanded to
conform therewith. In furtherance of the exclusive distribution rights
granted in Paragraph 3(a) in the event the definition of Field is expanded
pursuant to this Section 7 to include the Potential Field, Oculex agrees that
it will not, and will not permit a Third-Party Supplier to, sell to anyone
other than Storz, its sublicensees and/or Related Companies, any Ocutex
Product in such expanded Field in the Territory, including without limitation
any product in such expanded Field including an [*], an [*] or [*] ophthalmic
pharmaceutical agent(s) in addition to or in combination with any other
ophthalmic pharmaceutical agent or agents. The parties shall agree upon
acceptable milestone target dates and milestone payments for the development,
approval and supply of the first new Oculex Product in such expanded Field
substantially similar to those provided on the Effective Date for the first
Oculex Product supplied under this Agreement, taking into consideration the
commercial market for such new Oculex Product.

SECTION 8. PATENT ENFORCEMENT AND DEFENSE

     8(a) In the event that either party shall learn of any infringement of
any of the Licensed Patent Rights in any country of the Territory by any
third party, such party shall immediately notify the other party of such
infringement.

                                      20

[*] Confidential treatment requested with respect to certain portions of this
exhibit
<PAGE>

     8(b) Oculex shall have the first right, but not the obligation, to bring
suit in its own name for infringement of any patent of the Licensed Patent
Rights in any country of the Territory. If Oculex fails to institute and
action against such infringement within ninety (90) days after the parties
become aware of such infringement, Storz shall have the right to bring suit
in Storz' own name for infringement of any patent included in the Licensed
Patent Rights. Regardless of which party brings suit, the party bringing suit
shall consult with the other party regarding strategy therefor, and the other
party agrees to cooperate fully with the other party in the conduct of any
such suit, including if required to file suit, the furnishing of a power of
attorney granting only such authority as is essential for such filing and
conduct of the suit, and each party shall have the right to participate in
such action at its own expense using counsel of its own choice. Each party
shall be responsible for any costs and expenses for its own attorneys, and
any other expenses of suit shall be borne by the party filing suit. Any
recovery obtained by award or settlement or otherwise in such suit shall be
used to reimburse each party's expense (including counsel fees) and
thereafter, any remaining amount shall be shared equally by the parties.

     8(c) Either party hereto shall have the right to defend, with counsel of
its choosing, against any claim and/or suit for patent infringement brought
by any third party against such party based on such party's manufacture,
importation, offer for sale, use or sale of Oculex Product in any country of
the Territory, or to secure a royalty-bearing license from any such third
party to settle any such controversy; provided that any settlement of such
suit or license obtained with respect to such third party's technology shall
not materially adversely affect the Other party's rights and interests
without such other party's prior consent, such consent not to be unreasonably
withheld. Each party shall notify the other party hereto promptly of the
commencement of any such suit, and such other party shall cooperate fully
with and assist the party defending any such suit. The costs and expenses of
any such suit, counterclaim, defense and/or judgment against a party hereto
and/or any settlement of any such claim and/or suit shall initially be for
the account of such party. However, if any of the unreimbursed costs and
expenses, incurred in any such suit or claim are subject to a claim for
indemnification under Section 9, the party claiming indemnification for any
such suit or claim against such party and/or any settlement thereof, and/or
any payment or royalty made to any third party pursuant to a license from
such third party to avoid such party's infringement of any third-party patent
rights by manufacture, use, sale, offer for sale and/or import of Oculex
Products, shall be reimbursed by the indemnifying party hereto as provided in
Section 9.

SECTION 9. REPRESENTATIONS, WARRANTIES, COVENANTS AND INDEMNIFICATION

     9(a) Oculex covenants that it will use diligent efforts to pursue
approval of Oculex Products for sale by Storz in at least the Major European
Countries and the countries of Canada and South Africa, and to the extent
reasonably feasible in all other countries of the Territory.

     9(b) Oculex warrants and represents that Oculex is the owner of the
entire right, title and interest in and to, or is an exclusive licensee
under, the Licensed Patent Rights and the Licensed Know-how, that Oculex has
the right to grant any and all licenses and rights granted in Sections 3 and
4 hereof, that no license under any

                                      21
<PAGE>

of the Licensed Patent Rights and/or Licensed Know-how has heretofore been
granted in the Field, that to Oculex's best knowledge and belief the Licensed
Patent Rights are, or will be, valid and enforceable, and that manufacture,
use and/or sale of the Oculex Product and/or the Licensed Inventions will not
infringe any patent known to Oculex on the Effective Date.

     9(c) Ocutex warrants that Oculex will promptly disclose to Storz any and
all Licensed Know-how presently owned or heretofore developed by Oculex, and
covenants that Oculex will timely disclose to Storz any additional Licensed
Know-how that Oculex may own, acquire or develop during the term of this
Agreement, related to Storz' activities and necessary for Storz to carry out
its obligations and fully exercise its rights under the licenses and rights
in effect at the time concerned.

     9(d) Oculex covenants that Oculex will prosecute and/or maintain the
Licensed Patent Rights in a commercially reasonable manner for the term of
this Agreement and that after execution of this Agreement, any fee payable to
any patent office or agency of any country of the Territory for any of the
Licensed Patent Rights will not be paid based on a claim of small entity
status and that Oculex will instruct Oculex's attorneys to that effect.
Oculex further covenants that Oculex will provide to Storz, within thirty
(30) days of any request by Storz in connection with evaluation and/or
prosecution of an action by Storz against a third-party infringer of the
Licensed Patent Rights pursuant to Paragraph 8, any information and copies of
any records that Oculex has concerning conception and/or first reduction to
practice of the Licensed Patent Rights and the dates thereof that Storz may
reasonably require to bring and prosecute a suit against such infringer. The
responsibility for payment of any patent maintenance and/or other
governmental fees with respect to the filing prosecution and/or maintenance
of all patents and patent applications included in the Licensed Patent Rights
shall be paid by Oculex and Oculex retains the right to control and finally
decide any matters relating thereto.

     9(e) Oculex represents that Oculex, or any Third-Party Supplier, at the
time of delivery to Storz, has title to and the right to convey title to
Storz in, any Oculex Products sold to Storz or any sublicensees.

     9(f) Oculex warrants that as of the Effective Date Oculex was unaware of
any third party claims alleging that the sale and/or use of Oculex Products
infringe any third-party patents or other third-party proprietary rights.

     9(g) Oculex agrees to defend, indemnify and hold harmless Storz, its
sublicensees or Related Companies from any claim and/or suit, including
reasonable attorneys' fees therefor, for actual or alleged infringement,
including willful infringement (except to the extent such willfulness is
based on errors or omissions of Storz), by the manufacture, use, sale, offer
for sale or import of Oculex Products, or of any patents and/or other
proprietary rights of any third-party. If Storz is barred from selling or
reasonably determines to cease selling Oculex Products because of actual or
alleged infringement of any third-party patent or proprietary rights by
virtue of sale and/or use of Oculex Products, then Storz shall thereafter
have no obligation to purchase Oculex Products under the terms of this
Agreement until such infringement claim is resolved to Storz' reasonable
satisfaction.

                                      22
<PAGE>

     9(h) Oculex further represents and warrants that at the time of shipment
of Oculex Products to Storz, any sublicensee and/or Related Company, (i)
materials constituting or being part of any such shipment of Oculex Products
shall conform to the Specifications and that none of such materials will be
adulterated or misbranded within the meaning of the U.S. Federal Food, Drug
and Cosmetic Act, as amended, and the regulations issued thereunder, or any
similar law of any country of the Territory, or within the meaning of any
state or local law of any country of the Territory, the adulteration and
misbranding provisions of which are similar to the U.S. Federal Act, and (ii)
materials constituting or being part of any such shipment of Oculex Products
are not any product which may not, under the provisions of any law or
regulation, be introduced into commerce within the Territory. Oculex shall
reimburse Storz, its sublicensee and any Related Company for any costs of
voluntary or involuntary recall, recovery or withdrawal of Oculex Products
required by any laws, orders or regulations of any country of the Territory;
except to the extent that such recall arises out of the negligence or
improper act of Storz, its sublicensee and any Related Company or employees
or agents thereof. THE EXPRESS REPRESENTATIONS AND WARRANTIES STATED IN THIS
SECTION 9 ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.

     9(i) Oculex covenants that it will not make any changes to the Oculex
Products, the Specifications for Oculex Products, or the process of
manufacturing or quality controlling such materials without the consent of
Storz, which consent shall not be unreasonably withheld. Neither party hereto
shall be obligated to supply or manufacture under this Agreement any Oculex
Product that does not comply with applicable laws and regulations of the
countries of the Territory in which sale of Oculex Product has received
regulatory approval and Storz intends to sell such Oculex Product.

     9(j) The parties represent and warrant that they have the full right to
enter into this Agreement and that such party's entry into, and any terms of,
this Agreement separately or collectively do not conflict with any other
contractual obligations of such party. Each party agrees that it will not
enter into any agreements after the Effective Date hereof that are
inconsistent or conflict with such party's obligations under this Agreement.

     9(k) Upon notification by Storz to Oculex that there has been or may be
a claim and/or suit instituted by a third party against Storz, its
sublicensee or Related Company for personal injury or property damage by
virtue of the use of Oculex Products purchased from Oculex and/or any
Third-Party Supplier under this Agreement, then Oculex, its successors and
assigns shall defend, indemnify and save harmless Storz, its sublicensees and
any Related Companies, their successors and assigns, against such claim
and/or suit, including reasonable attorneys' fees therefor, unless such claim
or suit is wholly due to the negligence or improper act of Storz, its
sublicensee or Related Company, for which Storz shall similarly indemnify
Oculex, its successor and assigns. To the extent that such claim or suit is
in part due to the negligence or improper act of Storz, Oculex shall
indemnify Storz for that portion of such claim not due in part to the
negligence or improper act of Storz, its

                                      23
<PAGE>

sublicensee or Related Company, and Storz shall indemnify Oculex for that
portion of such claim due to the negligence or improper act of Storz.

     9(l) Upon notification by Oculex to Storz that there has been or may be
a claim and/or suit instituted by a third party against Oculex or a Related
Company of Oculex for personal injury or property damages arising out of the
use of Oculex Products manufactured by Storz, then Storz, its successors and
assigns shall defend, indemnify and save harmless Oculex, its successors and
assigns against such claim or suit, unless such claim or suit is wholly due
to the negligence or improper act of Oculex or any Related Company of Oculex,
or to any breach of any representation, warranty or covenant by Oculex, in
which event Oculex shall similarly indemnify Storz, its successors and
assigns. To the extent that such claim or suit is in part due to the
negligence or improper act of Oculex, Storz shall indemnify Oculex for that
portion of such claim not due in part to the negligence or improper act of
Oculex or its Related Company, and Oculex shall indemnify Storz for that
portion of such claim due to the negligence or improper act of Oculex or any
Related Company of Oculex. Any indemnification under this Agreement is
contingent upon the indemnified party giving the indemnifying party prompt
notice of such claim or suit and the indemnified party reasonably cooperating
with the indemnifying party with respect to such claim. The indemnifying
party shall have the right to control and conduct the defense thereof,
including the right to defend or settle such claim or suit, provided such
settlement does not materially adversely affect the rights of the indemnified
party, and the indemnified party and shall reasonably cooperate with the
indemnifying party's prosecution, defense and settlement of such claim.

     9(m) Within thirty (30) days following Oculex's receipt of Storz'
Initial Order under Paragraph 3(d) of this Agreement, Oculex shall establish
and thereafter for the duration of Oculex's supply of Oculex Products to
Storz hereunder, maintain and/or require any Third-Party Supplier to
maintain, comprehensive general liability insurance, including contractual
and product liability, in amounts not less than $1,000,000 per occurrence and
$3,000,000 annual aggregate covering any Oculex Products on a date of
occurrence basis (not a date of claim basis). Additionally, if any Oculex or
such Third-Party Supplier is located in the United States, then Oculex shall,
and shall require any such supplier to maintain Workers' Compensation
Insurance with employees liability coverage limits of not less than
$1,000,000. Oculex shall submit certificates evidencing such insurance to
Storz for the period of purchase of Ocutex Products by Storz or its
sublicensee or Related Company.

SECTION 10. PATENT AND LICENSE NOTICE

     Storz shall, and shall require each of its sublicensees  (including
Related  Companies),  if any, to mark all Licensed  Products made by Storz
and sold in the Territory  with a listing of the number(s) of any applicable
patent(s) or other  identification  of the Licensed  Patent Rights,  if
required under the provisions of the law of the country in which the same are
made.

                                      24
<PAGE>

SECTION 11. TRADEMARKS AND TRADENAMES

     11(a) Storz, its sublicensee and/or Related Company shall apply only
Storz' or any Storz sublicensee's and/or Related Company's trademarks to
Licensed Products manufactured by Storz hereunder, if any, except for the
notice required in Paragraph 11(b) hereof, and except as required by law.
Neither party may utilize the other party's tradename or trademarks for any
press release, advertising purpose or the like without the written consent of
the other party based on an advance review of any such proposed release or
advertisement.

     11(b) Paragraph 11(a) notwithstanding, the parties agree that Storz
will, in consultation with Oculex, select an appropriate, registerable
trademark(s) (hereinafter the "Designated Trademark(s)") for use in the
marketing and sale of the Oculex Products in the Territory. Such trademark
shall be initially owned by Oculex, and Oculex will file and prosecute an
application for registration of the Designated Trademark on the principal
register of each country of the Territory not later than one (1) month
following the first commercial sale of the Oculex Product in such country of
the Territory, for countries so providing, an intent to use registration
reasonably expected to mature into a commercial registration in countries in
which regulatory approval has been sought and for which an approvable letter
has been received by Oculex. Oculex hereby grants to Storz an exclusive
license in the Territory to use the Designated Trademark on the Oculex
Product(s) sold by Storz hereunder, which Designated Trademark will be
utilized in connection with Storz' commercialization of, and will be applied
to the packaging of, the Oculex Products sold or transferred in the
Territory. Storz shall have the right to apply to the Oculex Products and
utilize any trademark(s)s and labeling it selects in addition to the
Designated Trademark(s) upon Oculex' prior approval, which shall not be
unreasonably withheld, provided that any such additional trademarks and
labeling shall conform to applicable rules and regulations of government
authorities of each country in the Territory. After Storz has sold the Oculex
Product for more than two (2) years in a country of the Territory, Oculex
shall assign to Storz all right, title and interest in and to the Designated
Trademark(s) along with the goodwill associated therewith for such country in
the Territory, upon the written request of Storz and at no additional
compensation or reimbursement to Oculex. If Oculex assigns its right, title
and interest in the Designated Trademark to Storz pursuant to the preceding
sentence, Storz shall thereafter solely bear all costs accruing after the
date of such assignment of filing and prosecuting applications for
registration and of maintaining and defending all registrations of such mark
of each country in the Territory. Each party hereto covenants not to damage
the Designated Trademark(s) or to reduce the goodwill associated with the
Designated Trademark(s) during the conduct of business relating thereto
within or outside the Territory. Storz and Oculex each agree not to utilize
the Designated Trademark(s) in connection with, or apply the Designated
Trademark(s) to, any product other than an Oculex Product during Oculex's
continued supply of Oculex Products hereunder. In the event that this
Agreement is terminated by Oculex pursuant to Paragraphs 3(m), 3(n), 3(p),
16(a) or 16(b) and Oculex has assigned the Designated Trademark(s) to Storz
pursuant to this Paragraph 1 l(b), Storz shall assign to Oculex all right,
title and interest in and to the Designated Trademark(s) along with the good
will associated therewith upon

                                      25
<PAGE>

the written request of Oculex and at no compensation or reimbursement to
Storz. In the event that Oculex ceases to supply Oculex Product to Storz in
the event Storz exercises its rights to manufacture or to appoint a Storz
Additional Source pursuant to Paragraph 5(e), Storz shall retain the
exclusive right to use the Designated Trademark in connection with any
products sold by Storz in the Field in the Territory, whether or not such
products are covered by the Licensed Patent Rights.

SECTION 12. CONFIDENTIALITY

     12(a) During the term of this Agreement, and for a period of ten (10)
years after termination thereof, each party will maintain all Proprietary
Information received by it under this Agreement in trust and confidence and
will not disclose any such Proprietary Information to any third party or use
any such Proprietary Information for any purposes other than those necessary
or permitted for performance under this Agreement. In particular, neither
party shall use any know-how of the other party for the manufacture or sale
of any product other than the Oculex Product, except as expressly authorized
by this Agreement. Each party may use such Proprietary Information only to
the extent required to accomplish the purposes of this Agreement. Proprietary
Information shall not be used for any purpose or in any manner that would
constitute a violation of any laws or regulations, including without
limitation the export control laws of the United States or any foreign
country. Proprietary Information shall not be reproduced in any form except
as required to accomplish the intent of this Agreement. No Proprietary
Information shall be disclosed to any employee, agent, consultant or Related
Company who does not have a need for such information. To the extent that
disclosure is authorized by this Agreement, the disclosing party will obtain
prior agreement from its employees, agents, consultants, Related Companies or
clinical investigators to whom disclosure is to be made to hold in confidence
and not make use of such information for any purpose other than those
permitted by this Agreement. Each party will use at least the same standard
of care as it uses to protect its own Proprietary Information of a similar
nature to ensure that such employees, agents, consultants and clinical
investigators do not disclose or make any unauthorized use of such
Proprietary Information, which shall in any event not be less than reasonable
care. Each party will promptly notify the other upon discovery of any
unauthorized use or disclosure of the Proprietary Information. The foregoing
obligations of this Paragraph 12(a) shall not apply to, and proprietary
Information shall not include, any information which:

          (i)  is now, or becomes to be, in the public domain, through no
               breach of this Agreement by the receiving party; or

          (ii) the receiving party can demonstrate was in its possession
               prior to the time of disclosure under this Agreement by the
               disclosing party; or

         (iii) is disclosed to the receiving party by a third party owing no
               obligation of confidentiality to the disclosing party with
               respect to the Proprietary Information. The parties agree
               that the material financial terms of the Agreement will be
               considered Proprietary Information

                                      26
<PAGE>

               of both parties. Notwithstanding the foregoing, either party
               may disclose such terms to bona fide potential corporate
               partners, to the extent required or contemplated by this
               Agreement, and to financial underwriters and other parties
               with a need to know such information. All such disclosures
               shall be made only to parties under an obligation of
               confidentiality.

     12(b) Notwithstanding any other provision of this Agreement, each party
may disclose Proprietary Information if such disclosure:

          (i)  is in response to a valid order of a court or other
               governmental body of the United States or a foreign country,
               or any political subdivision thereof; provided, however, that
               the responding party shall first have given notice to the
               other party hereto and shall have made a reasonable effort to
               obtain a protective order requiring that the Proprietary
               Information so disclosed be used only for the purposes for
               which the order was issued and that the disclosure and use
               thereof be restricted as described in this Section 12 to the
               extent feasible under the circumstances;

          (ii) is otherwise required by law or regulation, including
               requirements imposed by equivalent authorities to the United
               States Secures and Exchange Commission; or

         (iii) is otherwise necessary to file or prosecute patent
               applications, prosecute or defend litigation, comply with
               applicable governmental regulations or otherwise establish
               rights or enforce obligations under this Agreement, but only
               to the extent that any such disclosure is necessary.

SECTION 13. ADVERSE REACTIONS

     The parties shall use diligent efforts promptly to report to each other
by telephone or facsimile any information on severe or unanticipated adverse
reactions to the use of any Oculex Product in Phase II Clinical Trials or in
any clinical trial of Oculex Products conducted thereafter. In no event shall
Storz disclose the occurrence or symptoms of any adverse reaction to any
third party without the prior written approval of Oculex, except as required
by law or regulation, in which case Storz shall use diligent efforts to
provide Oculex with simultaneous notification. Each party hereby covenants
with the other to make all adverse reaction reports to the appropriate
authorities in a timely fashion and in the manner required by all applicable
laws and regulations.

SECTION 14. FORCE MAJEURE

     Neither party to this Agreement shall be responsible to the other party
for nonperformance or delay in performance of any terms or conditions of this
Agreement due to acts of God, acts of governments, wars, riots, strikes,
accidents in transportation, or other causes beyond the reasonable control of
the parties, provided that the party affected by any of the foregoing shall
make reasonable efforts to overcome such event of force majeure. Failure to
pay money shall not be excused under this Section.

                                      27
<PAGE>

SECTION 15 TERM OF AGREEMENT

     Unless this Agreement shall be terminated by either party pursuant to
the provisions hereof, this Agreement shall remain in force and effect from
the Effective Date until the expiration of the last-to-expire of the Licensed
Patent Rights in the Territory, at which time this Agreement will
automatically renew for successive three (3) year periods, unless either
party shall by written notice six (6) months in advance of the end of such
renewal period advise that such party desires to terminate this Agreement,
and this Agreement shall expire effective with the end of the period during
which such notice shall have been delivered, in the event that Storz
exercises its option under Paragraph 5(d) or 5(e), this agreement shall
expire upon the later of (i) fifteen (15) years after the Effective Date or
(ii) the date on which Storz' exercise of such option under Paragraph 5(d) or
5(e) becomes effective. Upon expiration of this Agreement pursuant to this
Section 15, Storz, its sublicensees and any Related Companies shall have a
fully paid-up, royalty-free license under the Licensed Patent Rights in the
Territory and the Licensed Know-how to make, have made, import, offer to
sell, use and/or sell Licensed Products in the Territory without limitation.

SECTION 16. TERMINATION

     16(a) In the event that either party hereto shall fail to comply with
any of its material obligations under this Agreement, and such failure is not
cured within thirty (30) days after the other party provides written notice
of such failure to such party, which notice shall fully specify the
obligation with which the first party has not complied, then the other party,
by further written notice to such party, may terminate this Agreement.

     16(b) All rights and licenses granted under or pursuant to this
Agreement by Oculex to Storz are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of Title 11, U.S. Code (the "Bankruptcy Code"),
licenses and rights to "intellectual property" as defined under Section 101
of the Bankruptcy Code. The parties agree that Storz, as recipient of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code. Oculex shall also have the
right to terminate this Agreement in the event of the filing of a voluntary
or involuntary petition of bankruptcy of Storz.

     16(c) Storz may terminate this Agreement at any time on ninety (90) days
notice in writing to Oculex.

SECTION 17. ASSIGNABILITY

     17(a) This Agreement may be assigned by either of the parties hereto and
shall inure to the benefit of heirs, successors, assigns or other legal
representatives.

     17(b) Oculex agrees to notify Storz in writing within thirty (30) days
of its first knowledge of any change in ownership or transfer of rights in
any of the Licensed Patent Rights from any owner to any third party.

SECTION 18. NOTICES AND PAYMENTS

     Any notice or communication required or permitted to be given by either
party hereunder shall be in written form and shall be considered to be
sufficiently given if mailed by registered airmail or transmitted by telex,

                                      28
<PAGE>

facsimile or other electronic means, addressed to the parties hereto as
follows, or any substitute address of either party notified in writing to the
other party:

     To Storz:

     Storz Instrument Company
     3365 Tree Court Industrial Drive
     St. Louis, Missouri 63122, U.S.A.
     Attention: President
     Telephone Number: 314/225-5051
     Facsimile Number: 314/861-2137

     To Oculex:

     Oculex Pharmaceuticals, Inc.
     639 North Pastoria Avenue
     Sunnyvale, California 94086-2917
     Attention: President
     Telephone Number: 408/481-0424
     Facsimile Number: 408/481-0662

     Any payments to be made under this Agreement shall likewise be directed
to the address indicated above, or to a bank in the United States effective
thirty (30) days following receipt of written notice to that effect from
Oculex.

SECTION 19. APPLICABLE LAW

     The parties hereto agree that this Agreement shall be considered to have
been made in, and construed and interpreted in accordance with the
substantive laws of, the State of Missouri, the courts of which shall have
exclusive jurisdiction over any dispute arising hereunder.

SECTION 20. SEVERABILITY

     This Agreement is subject to the restrictions, limitations, terms and
conditions of all applicable governmental regulations, approvals and
clearances. If any term or provision of this Agreement is held invalid,
illegal or unenforceable in any respect for any reason, that invalidity,
illegality or unenforceability shall not affect any other term or provision
hereof, and this License Agreement shall be interpreted and construed as if
such term or provision, to the extent the same shall have been held to be
invalid, illegal or unenforceable, had never been contained herein. In the
event this Section 20 becomes applicable, the parties shall meet and attempt
to negotiate an amendment to this Agreement to achieve the parties' original
intent to the extent feasible and permissible under any applicable laws and
regulations.

SECTION 21. WAIVER

     Failure by either party to enforce any rights under this License and
Supply Agreement shall not be construed as a waiver of such rights nor shall
a waiver by either party in one or more instances be construed as
constituting a continuing waiver or as a waiver in other instances.

                                      29
<PAGE>

SECTION 22. MISCELLANEOUS

     22(a) Upon the termination of this Agreement and/or any sublicense
granted hereunder, Storz, its sublicensees and Related Companies shall have
the right to dispose of all Licensed Products and/or Oculex Products then on
hand, including work in process, and to meet all pending orders for Licensed
Products and/or Oculex Products, but earned royalty which would otherwise be
payable pursuant to Paragraph 5(a) of this Agreement had such termination not
become effective, shall be paid with respect to all such Licensed Products
and/or Oculex Products when sold as though this Agreement had not been
terminated.

     22(b) Neither termination nor expiration of this Agreement shall
terminate Storz' obligation to report and pay all earned royalty which shall
then have accrued up to the date of such expiration or termination. Storz'
obligation to submit its and any sublicensees' books and records for
inspection shall continue after such expiration or termination in accordance
with the provisions of Paragraph 6(a) hereof.

     22(c) This Agreement contains all of the agreements and understandings
made between the parties hereto concerning the subject matter hereof, and any
prior agreements, express or implied, relating to the subject matter hereof
are expressly superseded and canceled. No amendment of this Agreement shall
be effective unless in writing and signed by the parties hereto.

     22(d) This Agreement may be executed simultaneously in two identical and
unaltered counterparts, either one of which need not contain the signature of
more than one party, and in such event both such counterparts taken together
shall constitute one and the same agreement.

     IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate effective on the day and year first above written.

OCULEX PHARMACEUTICALS, INC.

By: /s/ Gerry B. Gin                   ATTEST:
   ----------------------------------
    Gerry B. Gin                       By: /s/ Vernon G. Wong
   ----------------------------------     -----------------------------------
         (Type or Print Name)

Title: President                           Vernon G. Wong
      -------------------------------     -----------------------------------
                                                  (Type or Print Name)
Date:  4/4/97
      -------------------------------

Fed. Tax#  77-0228667
         ----------------------------

STORZ INSTRUMENT COMPANY

By: /s/ Robert Blankemeyer             ATTEST:
   ----------------------------------
    Robert Blankemeyer                 By: /s/ Carla Young
   ----------------------------------     -----------------------------------
          (Type or Print Name)

Title:  President                          Carla Young
      -------------------------------     -----------------------------------
                                                  (Type or Print Name)
Date:  4/11/97
      -------------------------------

                                      30

<PAGE>

                               APPENDIX A

                 LICENSED PATENTS AND PATENT APPLICATIONS

SECTION 1: The patents and patent applications for the United States of
America corresponding to the Licensed Patent Rights referred to in the
attached Distribution, Supply and License Agreement (Foreign) include,
without limitation, the following:

<TABLE>
<CAPTION>

 OCULEX'S       COUNTRY                              PATENT          EXPIRATION
  PATENT#      OR P.C.T.          PATENT#           APPLN.#             DATE              OCULEX'S PATENT TITLE
 --------      ---------          -------           -------          ----------           ---------------------
 <S>           <C>               <C>                <C>              <C>              <C>                   <C>
                                                                                      Biodegradable
                  US             [*]                [*]               [*]                Implants           Ocular
                                                                                      Biodegradable
                  US             [*]                [*]               [*]                Implants           Ocular
</TABLE>

SECTION 2: The Licensed Patent Rights for countries of the Territory
corresponding to the United States Patents identified in Section 1 above and
referred to in the attached Distribution, Supply and License Agreement
(Foreign) include, without limitation, the following:

<TABLE>
<CAPTION>

 OCULEX'S       COUNTRY                              PATENT          EXPIRATION
  PATENT#      OR P.C.T.          PATENT#           APPLN.#             DATE              OCULEX'S PATENT TITLE
 --------      ---------          -------           -------          ----------           ---------------------
 <S>           <C>               <C>             <C>                 <C>              <C>                   <C>
                                                                                      Biodegradable
               [*]               [*]                [*]               [*]                Implants           Ocular
                                                                                      Biodegradable
               [*]               [*]                [*]               [*]                Implants           Ocular
</TABLE>

                                      31

[*] Confidential treatment requested with respect to certain portions of this
exhibit

<PAGE>

                                   APPENDIX B

                        SPECIFICATIONS OF OCULEX PRODUCTS

               A biodegradable drug delivery system (DDS) with the main
               components being composed of [*] and dexamethasone (dexamethasone
               DDS). The formulation is configured to give a therapeutic level
               of dexamethasone for a sufficient period within the interior of
               the anterior chamber of the eye to control inflammation after
               cataract surgery. The entire system will degrade within a three
               to four week period. The packaging of the product shall consist
               of:

          *    Dexamethasone DDS
          *    Container holding Dexamethasone DDS
          *    [*]
          *    Foil pouch to house Dexamethasone DDS and [*]
          *    Package insert
          *    Box to house pouched Dexamethasone DDS

               The dexamethasone DDS shall be delivered as a fully packaged
               sterilized and labeled product.

                                      32

[*] Confidential treatment requested with respect to certain portions of this
exhibit

<PAGE>

                                  APPENDIX D

          EXAMPLES OF PERCENTAGE ROYALTY DETERMINATION UNDER SECTION 5

EXAMPLE 1:

Under the following table from Paragraph 5(a)(i) above:

<TABLE>
<CAPTION>
                    Cumulative Net Sales In Territory For Calendar Year           Percentage Royalty
                    ---------------------------------------------------           ------------------
                    <S>                                                           <C>
                    [*]                                                                   [*]
                    [*]                                                                   [*]
                    [*]                                                                   [*]
</TABLE>

assume Net Sales for the first quarter of a calendar year equal [*],
and Net Sales for the second quarter equal [*]. Also assume that the
Net Sales for the second quarter are based on sales of [*] units of Oculex
Product. The adjusted ranges under Paragraph 5(a)(i) would be as follows:

<TABLE>
<CAPTION>
                    Cumulative Net Sales In Territory For Calendar Year           Percentage Royalty
                    ---------------------------------------------------           ------------------
                    <S>                                                           <C>
                    [*]                                                                   [*]
                    [*]                                                                   [*]
                    [*]                                                                   [*]
</TABLE>

The percentage royalty used for the first [*] in Net Sales for the second
quarter will be [*], and the percentage royalty used for the last [*] in Net
Sales for the second quarter will be [*] for a total of $[*]. Earned royalty
payable would be determined by subtracting the total Product Supply Price for
all units of Oculex Products on which Net Sales were reported for royalty
calculation for the second calendar quarter from the total royalty calculated
for such second quarter utilizing the percentage royalties from the table, or

<TABLE>
<S>                                                     <C>                      <C>
[*]                                                     [*]                      [*]
</TABLE>

EXAMPLE 2:

Under the following table from Paragraph 5(a)(i) above:

<TABLE>
<CAPTION>
                    Cumulative Net Sales In Territory For Calendar Year           Percentage Royalty
                    ---------------------------------------------------           ------------------
                    <S>                                                           <C>
                    [*]                                                                   [*]
                    [*]                                                                   [*]
                    [*]                                                                   [*]
</TABLE>

assume Net Sales for the first, second and third quarters of a calendar year
equal $[*], [*] and [*], respectively for Cumulative Net Sales of $[*], and
Net Sales for the fourth quarter equal $[*]. Also assume that the Net Sales
for the fourth quarter are based on sales of [*] units of Oculex Product.
The adjusted ranges under Paragraph 5(a)(i) would be as follows:

                                      33

[*] Confidential treatment requested with respect to certain portions of this
exhibit

<PAGE>

<TABLE>
<CAPTION>
                    Cumulative Net Sales In Territory For Calendar Year           Percentage Royalty
                    ---------------------------------------------------           ------------------
                    <S>                                                           <C>
                    [*]                                                                   [*]
                    [*]                                                                   [*]
                    [*]                                                                   [*]
</TABLE>

The percentage royalty used for the first $[*] in Net Sales for the fourth
quarter will be [*], and the percentage royalty used for the last [*]
in Net Sales for the fourth quarter will be [*] for a total of $[*]. Earned
royalty payable would be determined by subtracting the total Product Supply
Price for all units of Oculex Products on which Net Sales were reported for
the fourth calendar quarter from the total royalty calculated for such fourth
quarter utilizing the percentage royalties from the table, or

<TABLE>
<S>                                                     <C>                      <C>
[*]                                                     [*]                      [*]
</TABLE>

                                      34


[*] Confidential treatment requested with respect to certain portions of this
exhibit