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                                                                 Exhibit 10.13

                DISTRIBUTION, SUPPLY AND LICENSE AGREEMENT (U.S.)

         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");

                              W I T N E S S E T H:

         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  [*]  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 Oculex 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 in
the IMS Reports, 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 in the IMS Reports, 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 IMS Reports
for such applicable period do not exceed twenty percent (20%) of sales of the
Oculex Products by Storz and its sublicensees during such applicable period
as reported by such IMS Reports.

         1(c) "FDA" shall mean the United States Food and Drug Administration.

         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 Audit" shall mean an assessment of (i) Oculex's and/or any
Third-Party Supplier's (as defined herein) 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 laws or regulations of any relevant foreign governments,
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) "IMS Reports" shall mean the quarterly reports published by the
Hospital/Laboratory Database Division of IMS America, Plymouth Meeting,
Pennsylvania 19462-1048 in its publication "Hospital Supply Index: Product
Analyses", or by a mutually acceptable substitute medical product sales
reporting agency or publication.

         1(g) "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(h) "Licensed Patent Rights" shall mean (i) the patents and patent
applications identified in the first section 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 1(i)), or
substitute patent applications of any such applications; (iii) any foreign
counterpart of or corresponding to such patents and patent applications in
the Territory, including, without limitation, those patents and patent
applications identified in the second section 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 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(i)     "Licensed Product", singular or plural, shall mean:

               (i)  any product useful in the Field claimed in any pending claim
                    in any pending patent application of the Licensed Patent
                    Rights in the Territory, or claimed in one or more valid,

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                    enforceable claims in one or more unexpired patents of the
                    Licensed Patent Rights in the Territory, or

               (ii) any product useful in the Field 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 the Territory, or claimed in one
                    or more valid, enforceable claims in one or more unexpired
                    patents of the Licensed Patent Rights in the Territory.

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

         1(k) "Net Sales" shall mean the total or gross billings for sales or
other transfers of Oculex Products by Storz, or any sublicensees and/or any
Related Companies of Storz, 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.

         1m) "Phase II Clinical Trials" shall mean the well controlled trials
being conducted in the Territory according to the then current good Clinical
Practice regulations promulgated by the FDA for evaluating the Oculex Product
versus placebo in cataract patients.

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

         1(o) "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 attributes for that Oculex Product, in accordance with
the FDA document entitled "General Principles of Process

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Validation", and other FDA documents and regulations, and any applicable
similar regulations of any relevant foreign governments.

         1p) "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(q) "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(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 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 FDA 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 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.

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         1(u) "Territory" shall mean the United States of America and its
territories and possessions.

         1(v) "Third Party Supplier" shall mean any third party designated by
Oculex as a FDA approved supplier of Oculex Products.

         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 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,
of which  [*]  shall be paid as a license fee in full
consideration for the license to utilize the Licensed Know-how granted in
Paragraph 4(a) hereof, and of which the remaining  [*]
shall be paid as a license fee in partial consideration for the license of
the Licensed Patent Rights granted in Paragraph 4(b) 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), (ii) and (iii):

               (i)  PHASE II CLINICAL TRIAL MILESTONE: Within sixty (60) days
                    following Storz' receipt of documentation evidencing results
                    from Oculex's completion of Phase II Clinical Trials, Storz
                    will make a Milestone Payment for such Phase II Clinical
                    Trials in accordance with the following schedule, if the
                    results achieved in such completed Phase II Clinical Trial
                    demonstrate that the Oculex Product is  [*] more [*]  than
                    [*]  with  [*]  or  [*] than normally associated with [*]:

<TABLE>
<CAPTION>

                                    Date Documentation is Received by Storz          Amount
                                    ---------------------------------------          ------
                                  <S>                                             <C>
                                     [*]                                                [*]
                                     [*]                                                [*]
                                     [*]                                                [*]
</TABLE>

               (ii) APPROVAL 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
                    FDA's earliest NDA approval of the Oculex Product for the
                    United States, Storz will make a Milestone Payment in
                    accordance with the following schedule, based on
                    demonstration in well controlled phacoemulsion-technique
                    cataract surgery trials available to support a claim under
                    regulatory requirements in the Territory that:

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

               In the event that Oculex demonstrates that the Oculex Product is
               [*]  more  [*]  than  [*]  under Paragraph 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).

               (iii) 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 FDA's earliest NDA approval of the Oculex
                    Product for the United States, 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)(ii) that:

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

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<TABLE>
<CAPTION>

                                    Date of Approval                            Amount
                                    ----------------                            ------
                                 <S>                                          <C>
                                    [*]                                          [*]
                                    [*]                                          [*]
                                    [*]                                          [*]
</TABLE>

                    or, if (a) is not satisfied, then

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

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

                    Any payment under this Paragraph 2(b)(iii) 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.

               (iv) 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 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, any sublicensees, and/or any Related Companies of

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Storz, or have sold by a Third-Party Supplier only to Storz, any 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 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
the 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
(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. After any necessary regulatory, pricing and reimbursement approvals are
obtained, Storz will promote and market the Oculex Products in the Territory
on a timely basis employing at least the same level of advertising, marketing
and promotion efforts that Storz employs with respect to Storz' other drug
products of comparable commercial significance under similar circumstances.
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, as
required under the Specifications for such Oculex Product. Any Oculex Product
delivered by Oculex to Storz under this Agreement which is approved by the
FDA 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 on the date of delivery to Storz, and
(ii) not more than six (6) months of such FDA-approved maximum shelf life
elapsed. Any Oculex Product delivered by Oculex to Storz under this Agreement
approved by the FDA 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-approved maximum shelf life elapsed.

         3(c) Storz and its sublicensees 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 the
Territory. Storz will

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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 of an NDA requesting approval of the Oculex Products, Storz will supply
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 the Territory following approval of the NDA by
the FDA. Within thirty (30) days following Oculex's delivery to Storz of a
copy of a letter received by Oculex from the FDA 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. Oculex shall not be obligated to
supply in any quarter covered by the Initial Forecast more than the quantity
estimated for such quarter in the Initial Forecast. After submission of the
Initial Order, Storz may thereafter place further orders for FDA-approved
Oculex Product(s), provided that Storz pays the royalty prepayment due to
Oculex pursuant to Paragraph 2(b)(iii) on a timely basis.

         3(e) For all Oculex Products, except 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 any 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 any Samples ordered, subject to a
limitation on the number of Samples that Oculex or the Third Party Supplier
must supply of (i)  [*]  of amounts of Units of Octet Products included in
the forecast for the first year immediately following the date on which
Oculex first delivers Oculex Product 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

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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 the 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
provided in the nonbinding forecast for such calendar quarter due five (5)
months prior to the beginning of the applicable calendar quarter, or (ii)  [*]
  in excess of the amount provided in the nonbinding forecast for such
calendar quarter 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 FDA's first
NDA approval of the Oculex Product for sale in the United States, Oculex will
advise Storz in writing of its intention to qualify a Second Source.

         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 Paragraph 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

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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 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 reasonable prior 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 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

                                      11
<PAGE>

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 in the Territory
(an "Implant 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 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 any written notice of intention to terminate pursuant to this Paragraph
3(m) to Storz 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 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 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 within
such one hundred eighty (180) day 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

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Oculex. Oculex must deliver any written notice of intention to terminate
pursuant to this Paragraph 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.

         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)(iii) hereof, Storz
is distributing or selling a Competing Product, Oculex shall have the right to
convert the exclusive rights and licenses granted to Storz 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(0) by providing written notice to Storz of
Oculex's intention to exercise its Conversion 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(0) 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, or be deemed to have
waived its rights under this Paragraph 3(0) with respect to that Competing
Product. Any 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 within such one hundred twenty (120) day period. The foregoing
provisions of this Paragraph 3(o) 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)(iii), 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(o), for a period
of one (1) year following the date on which Storz pays the amount due under
Paragraph 2(b)(iii) 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

                                      13
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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.

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.

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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 calculation of earned
royalty on Net Sales 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 and Storz' ability to promote the
alternative efficacy and side effect claims, as set forth hereinafter:

               (i)  if the Oculex Product has been demonstrated in well
                    controlled phacoemulsion-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 (i) is not satisfied, then

               (ii) if the Oculex Product has been demonstrated in well
                    controlled phacoemulsion-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):

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<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.

               (iv)  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,

                         (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  [*]  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

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                              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 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 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 under the other
terms of this Agreement.

         5(c) If (i) Oculex advises Storz that Oculex does not intend to qualify
a Second Source; or (ii) Oculex advises Storz that Oculex intends to qualify a
Second Source 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 within three (3) years

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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 sublicensee 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 of Storz,
its sublicensees and/or Related Companies for Oculex Products 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), 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  [*]  set forth in Subparagraphs 5(a)(i) and (ii) for the
remaining term of this Agreement.

         5(e) If for any reason Oculex (i)  [*]  , or (ii)  [*] , 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 import, or have manufactured by a Storz Additional
Source, the total requirements for Oculex Products of Storz, its sublicensees
and/or Related Companies for the Territory and 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 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

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disclosed to Storz to use, offer to sell and sell Oculex Products granted in
Paragraphs 4(a) and 4(b), and 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 its 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 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

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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 any 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, any 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 country of sale 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 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, and shall be
reinstated immediately upon any withdrawal or other invalidation of such
prohibition.

         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 Oculex
Products by Storz, any Storz sublicensee or any Related Company shall

                                      20

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

<PAGE>

be paid by Storz, any 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 Oculex develops any product within the Potential Field
to the point that initial safety trials of such product in humans have been
completed anywhere in the world, and Oculex has formulated a protocol for
initial safety and efficacy clinical trials, Oculex shall make available to
Storz all information in Oculex's possession regarding prior trials and
development of such product that Storz may reasonably require to determine
its interest in such product. Storz shall have one hundred twenty (120) days
after receiving all of such information (hereinafter referred to as
"Evaluation Period") to evaluate its interest in expanding the definition of
Field under this Agreement to include the Potential Field. Storz shall notify
Oculex of its interest in such expansion of the Field to include the
Potential Field by providing written notice thereof to Oculex within the
Evaluation Period. Upon the date such notice is received by Oculex, the
definitions of Field in this Agreement and in any other agreement between the
parties relating to the distribution of the Oculex Product outside the
Territory shall be 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 or dependent upon the definition of the 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 Oculex
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.

                                      21

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

<PAGE>

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 the Territory by any third party, such
party shall immediately notify the other party of such infringement.

         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. 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, 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.

                                      22
<PAGE>

SECTION 9.    REPRESENTATIONS, WARRANTIES, COVENANTS AND INDEMNIFICATION

         9(a) Oculex warrants and represents that the Phase II Clinical Trials
are being conducted in phacoemulsion-technique cataract surgeries with adequate
patients to demonstrate statistical significance.

         9(b) Oculex covenants that it will use diligent efforts to pursue
approval of Oculex Products for sale by Storz in the Territory.

         9(c) 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 granted in Sections 3 and 4 hereof, that no
license under any of said Licensed Patent Rights and/or Licensed Know-how has
heretofore been granted in the Field, that to Oculex's best knowledge and belief
on the Effective Date the Licensed Patent Rights are, or will be, valid and
enforceable, and that manufacture, use, import, offer for sale and/or sale of
the Oculex Products will not infringe any patent presently known to Oculex on
the Effective Date.

         9(d) Oculex covenants 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 is
obligations and fully exercise its rights under the licenses in effect at the
time concerned.

         9(e) 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, that any fee payable to
the United States Patent and Trademark Office 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 Section 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 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(f) Oculex represents and warrants that as of the Effective Date,
Oculex is its own ultimate parent entity and does not have total assets and/or
annual net sales of Ten Million U.S. Dollars (US$10,000,000.00) or more within
the meaning of Title II of the Hart-Scott-Rodino Antitrust Improvement Act of
1976 (15 U.S.C. Section 18a)

                                      23
<PAGE>

and the regulation promulgated thereunder, 16 C.F.R. 801.1 et seq.
Consequently, the parties mutually agree that a pre-merger notification is
not required pursuant to such statute or rules.

         9(g) 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(h) 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(i) 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 wilfulness 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.

         9(j) 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
foreign law, or within the meaning of any state or local law, 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 interstate commerce. 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
U.S. federal, state or local laws, orders or regulations; 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(k) 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 express consent
of Storz, which consent shall not be unreasonably withheld. Neither party hereto
shall be obligated to

                                      24
<PAGE>

supply or manufacture under this Agreement any Oculex Product that does not
comply with applicable U.S. federal, state and local laws and regulation.

         9(l) 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(m) 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 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(n) 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

                                      25
<PAGE>

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(o) 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 employer's 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 Oculex 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 the number(s) of any applicable patent(s) of the Licensed
Patent Rights in accordance with the provisions of 35 U.S.C. Section. 287.

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 1 l(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 1 l(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(s)
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 the United States Patent and Trademark Office not later than one
(1) month following the first commercial sale of the Oculex Product. 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 both parties'
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 trademarks and labeling it
selects in addition to the Designated Trademark upon Oculex' prior approval,
which shall not be unreasonably withheld, provided that any such additional
trademarks and labeling

                                      26




<PAGE>

shall conform to applicable rules and regulations of government authorities in
the Territory. After Storz has sold the Oculex Product for more than two (2)
years, Oculex shall assign to Storz all right, title and interest in and to the
Designated' Trademark along with the goodwill associated therewith 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 in the Territory. Each
party hereto covenants not to damage the Designated Trademark or to reduce the
goodwill associated with the Designated Trademark during the conduct of business
relating thereto within or outside the Territory. Storz and Oculex each agree
not to utilize the Designated Trademark in connection with, or apply the
Designated Trademark 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 to Storz pursuant to
this Paragraph 11 (b), Storz shall assign to Oculex all right, title and
interest in and to the Designated Trademark along with the good will associated
therewith upon 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. 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

                                      27
<PAGE>

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 by competent
                           proof 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 Confidential
                           Information.

The parties agree that the material financial terms of the Agreement will be
considered Proprietary Information 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 the Securities and Exchange
                           Commission with respect to documents filed therewith;
                           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

                                      28
<PAGE>

                           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 or as necessary to act in a medical
emergency, 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.


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 patents
included in the Licensed Patent Rights in the Territory, or if no such patent
issues, until fifteen (15) years after the Effective Date. This Agreement will
thereafter 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,
in which case this Agreement shall expire effective six (6) months after the
date on which such notice is 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 of its Related Companies shall have a fully paid-up,
royalty-free license under the Licensed Patent Rights and the Licensed Know-how
in the Territory to make, have made, import, offer to sell, use and/or sell
Licensed Products in the Territory without limitation.

                                      29
<PAGE>

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 the parties' 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,
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

                                     30
<PAGE>

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 designated in writing
by Oculex effective thirty (30) days following Storz' receipt of such written
notice 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 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.

SECTION 22.  MISCELLANEOUS

         22(a) Upon the termination of this Agreement and/or any sublicense
granted hereunder, Storz, its sublicensees and any 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 its sublicensees' books and records for inspection
shall continue after such expiration or termination in accordance with the
provisions of Paragraph 6(a) hereof.

                                      31
<PAGE>

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

Title:            President                          Vernon G. Wong
      ------------------------------------         ----------------------------
                                                       (Type or Print Name)
Date:             4/14/97
     -------------------------------------

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

STORZ INSTRUMENT COMPANY

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

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



                                      32
<PAGE>

                                   APPENDIX A


                             LICENSED PATENT RIGHTS

The Licensed Patent Rights for the United States of America referred to in the
attached Distribution, Supply and License Agreement (U.S.) include, without
limitation, the following:

<TABLE>
<CAPTION>

                        GRANT           PATENT
OCULEX'S PATENT #        DATE           APPLN.#       FILING DATE  EXPIRATION DATE           OCULEX'S PATENT TITLE
<S>                    <C>          <C>               <C>          <C>           <C>                         <C>
                                                                                    Biodegradable              Ocular
                          US            [*]              [*]        [*]             Implants
                                                                                    Biodegradable              Ocular
                          US            [*]              [*]        [*]             Implants
</TABLE>


[*] 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.

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

<PAGE>

                                   APPENDIX C

                              PURCHASE ORDER SAMPLE




<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 Prior Sales equal [*], and the Current Sales equal  [*] . Prior Sales
falls within the first range of the applicable table and the Range
Differential ( [*]  of $ [*]  minus Prior Sales) equals  [*] . In this case,
the Current Sales are  [*]  than the Range Differential, and 5(a)(iv)(1)(b)
applies. Therefore, because the Prior Sales falls in the first range, the
percentage royalty applicable to the Range Differential portion ( [*] ) of
Current Sales for the second quarter will be  [*] , and the percentage
royalty applicable to the portion of Current Sales  [*]  the Range
Differential (Current Sales of  [*]  minus Range Differential of  [*] [*] )
for the second quarter will be  [*] . The Total Earned Royalty on Net Sales
for the second quarter equals  [*]  (Range Differential portion)  [*]  by  [*]
  ( [*] ), plus  [*]  ( [*]  Range Differential portion)  [*]  by  [*]  ( [*]
), for a total of  [*] . Earned Royalty Payable would be determined by  [*]
the number of units of Oculex Products on which Net Sales were reported for
royalty calculation for the second calendar quarter  [*]  the Purchase Price
under Paragraph 3(c) [ [*]  units  [*]  by  [*]  =  [*] ], and  [*]  the
result from Total Earned Royalty on Net Sales calculated for such second
quarter, or

      [*]

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, 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 Prior Sales equal
[*] , and the Current Sales equal  [*] . Prior Sales falls within the second
range of the applicable table and the Range Differential ( [*]  of  [*]
minus Prior Sales) equals  [*] . In this case, the Current Sales are  [*]
than the Range Differential, and 5(a)(iv)(1)(b) applies. Therefore, because
the Prior Sales falls in the  [*] range, the percentage royalty applicable to
the Range Differential portion ( [*] ) of Current Sales for the second
quarter will be  [*] , and the percentage royalty applicable to the portion
of Current Sales  [*]  the Range Differential (Current Sales of  [*] minus
Range Differential of  [*]  =  [*] ) for the second quarter will be  [*] .
The Total Earned Royalty on Net Sales for the second quarter equals  [*]
(Range Differential portion)  [*]  by  [*] ( [*] ), plus  [*]  ( [*]  Range
Differential portion)  [*]  by  [*]  ( [*] ), for a total of  [*] . Earned
Royalty Payable would be determined by  [*]  the number of units of Oculex
Products on which Net Sales were reported for royalty calculation for the
second calendar quarter  [*]  the Purchase Price under Paragraph 3(c) [ [*]
units  [*]  by  [*] ], and  [*]  the result from Total Earned Royalty on Net
Sales calculated for such second quarter, or

          [*]

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