<PAGE>

                                                            Exhibit 10.10
                                                            -------------



                               LICENSE AGREEMENT

                                    BETWEEN

                         CONTROL DELIVERY SYSTEMS, INC.

                                      AND

                           BAUSCH & LOMB INCORPORATED



  This Agreement is confidential and shall not be disclosed to any third party
   except in accordance with the procedures specified in Section 35 hereof.



                            Dated as of June 9, 1999
<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                 Page
                                                                                 ----
<S>                                                                              <C>

Article 1 - Definitions........................................................     1
 1.1 Additional R&D Payment....................................................     1
 1.2 Affiliate.................................................................     1
 1.3 Applicable Royalty........................................................     1
 1.4 B&L Licensed Product......................................................     1
 1.5 Base Royalty..............................................................     2
 1.6 CDS Indication............................................................     2
 1.7 CDS Licensed Product......................................................     2
 1.8 Clinical IP...............................................................     2
 1.9 Europe....................................................................     2
 1.10 FDA......................................................................     2
 1.11 Indication...............................................................     2
 1.12 Intermediate Market......................................................     2
 1.13 Invention................................................................     2
 1.14 Know-how.................................................................     2
 1.15 Licensed Field...........................................................     2
 1.16 Licensed Know-how........................................................     3
 1.17 Licensed Patents.........................................................     3
 1.18 Licensed Product.........................................................     3
 1.19 Licensed Territory.......................................................     3
 1.20 Market...................................................................     3
 1.21 Net Sales................................................................     3
 1.22 Other Indication.........................................................     4
 1.23 Other Market.............................................................     4
 1.24 Patent Rights............................................................     4
 1.25 PCT......................................................................     4
 1.26 Post-Termination Know-how................................................     4
 1.27 Post-Termination Patents.................................................     4
 1.28 Person...................................................................     4
 1.29 Sublicense...............................................................     4
 1.30 Sublicensee..............................................................     4
 1.31 Target Market............................................................     5
 1.32 Third Party Licensed Product.............................................     5
 1.33 UKRF.....................................................................     5
 1.34 UKRF Licenses............................................................     5
 1.35 Valid Claim..............................................................     5
Article 2 - Granting Clause....................................................     5
 2.1 License Grant.............................................................     5
 2.2 Sublicensing..............................................................     5
 2.3 Non-suit..................................................................     5
Article 3 - Royalties..........................................................     6
 3.1 Running Royalties.........................................................     6

                                       1
<PAGE>

   3.1.1 Net Sales of CDS Licensed Products....................................     6
   3.1.2 Net Sales of Third Party Licensed Products............................     6
   3.1.3 Net Sales of B&L Licensed Products....................................     7
   3.1.4 Net Sales in Countries Without Patent Protection......................     8
   3.1.5 Royalties Payable Only Once...........................................     9
 3.2 Timing of Royalty Payments................................................     9
 3.3 Withholding Taxes.........................................................     9
Article 4 - License and Maintenance Fees.......................................     9
 4.1 License and Maintenance Fees..............................................     9
Article 5 - Development of Licensed Products...................................    10
 5.1 Joint Diligence Obligation................................................    10
 5.2 Licensee's General Diligence Obligations..................................    10
 5.3 Licensor's General Diligence Obligations..................................    10
 5.4 Steering Committee........................................................    10
 5.5 Dispute Resolution........................................................    11
 5.6 Research and Development Plan.............................................    11
 5.7 Monitoring................................................................    11
 5.8 Technical Assistance......................................................    11
 5.9 Licensor's Conduct of Ophthalmic Research and Development.................    12
Article 6 - Payment of Research and Development Costs..........................    12
 6.1 Budget....................................................................    12
 6.2 Limit.....................................................................    13
Article 7 - Post Commercialization Research: Regulatory Approval Expenses......    13
 7.1 Post-Commercialization Research: Additional R&D Payments..................    13
 7.2 Termination of Additional R&D Payments....................................    13
 7.3 Regulatory Approval Expenses..............................................    14
Article 8 - Performance Obligations............................................    14
 8.1 Market Projection Plan....................................................    14
 8.2 Performance Minimums......................................................    15
 8.3 Aggregation of Minimum Payment Obligations................................    16
 8.4 Marketing Obligations.....................................................    17
Article 9 - Reporting and Accounting Provisions................................    17
 9.1 Report....................................................................    17
 9.2 Record Keeping by Licensee................................................    17
 9.3 Termination Report........................................................    18
 9.4 Record Keeping by Licensor................................................    18
Article 10 - Favored Nation....................................................    18
 10.1 Favored Nation...........................................................    18
Article 11 - Ownership.........................................................    19
 11.1 Ownership................................................................    19
Article 12 - Filing and Maintenance of Patents.................................    19
 12.1 Filing and Maintenance...................................................    19
 12.2 Compulsory Licenses......................................................    20
Article 13 - Enforcement of Intellectual Property Rights.......................    20
 13.1 Enforcement..............................................................    20
Article 14 - Term: Termination.................................................    21

                                       2
<PAGE>

 14.1 Expiration of Royalty Obligations........................................    21
 14.2 Term.....................................................................    21
 14.3 Termination by Licensor..................................................    21
   14.3.1 Failure to Pay.......................................................    21
   14.3.2 Breach...............................................................    22
   14.3.3 Bankruptcy...........................................................    22
 14.4 Termination by Licensee..................................................    22
   14.4.1 Indication Termination...............................................    22
   14.4.2 Without Cause........................................................    23
   14.4.3 Breach...............................................................    23
 14.5 Bankruptcy...............................................................    23
 14.6 Effect of Termination....................................................    23
 14.7 Grant-Back...............................................................    24
 14.8 Competitor...............................................................    25
Article 15 - Ownership of Clinical IP..........................................    25
 15.1 Clinical IP..............................................................    25
   15.1.1 Clinical IP Outside the Licensed Field...............................    25
   15.1.2 Clinical IP Upon Termination of Additional R&D Payments..............    26
   15.1.3 Clinical IP Upon Termination Without Cause...........................    26
   15.1.4 Clinical IP Upon Termination of a Licensed Product In An Indication..    26
   15.1.5 Clinical IP Upon Non Exclusivity.....................................    26
 15.2 Transfer of Clinical IP..................................................    27
Article 16 - University of Kentucky Research Foundation Licenses...............    27
 16.1 UKRF Licenses............................................................    27
Article 17 - Manufacturing and Supply..........................................    28
 17.1 Manufacturing............................................................    28
 17.2 Supply Agreement.........................................................    28
Article 18 - Indemnification...................................................    28
 18.1 Indemnification of Licensee..............................................    28
 18.2 Indemnification of Licensor..............................................    29
 18.3 Limitation of Liability..................................................    29
 18.4 Procedure for Indemnification............................................    29
 18.5 Insurance................................................................    30
Article 19 - Trademarks........................................................    30
 19.1 Trademarks...............................................................    30
Article 20 - Noncompetition....................................................    30
 20.1 Noncompetition...........................................................    30
Article 21 - Representations and Warranties....................................    30
 21.1 Representations and Warranties of Both Parties...........................    30
 21.2 Representations and Warranties of Licensor...............................    31
Article 22 - Express Warranty of Non-Infringement..............................    32
 22.1 Non-Infringement Warranty................................................    32
 22.2 Warranty Disclaimer......................................................    33
 22.3 Operations in Compliance with Law........................................    33
Article 23 - Infringement of Third Party's Patents.............................    33
 23.1 Infringement of Third Party Patents......................................    33

                                       3
<PAGE>

Article 24 - Force Majeure.....................................................    35
 24.1 Force Majeure............................................................    35
Article 25 - Choice of Law/Forum...............................................    35
 25.1 Choice of Law/Forum......................................................    35
Article 26 - Dispute Resolution................................................    36
 26.1 Disputes.................................................................    36
Article 27 - Notices...........................................................    37
 27.1 Notices..................................................................    37
Article 28 - Merger Clause.....................................................    38
 28.1 Merger...................................................................    38
Article 29 - Integration Clause................................................    38
 29.1 Integration..............................................................    38
Article 30 - Severability Clause...............................................    38
 30.1 Severability.............................................................    38
Article 31 - No Waiver.........................................................    38
 31.1 No Waiver................................................................    38
Article 32 - General Liability Release for Employees...........................    38
 32.1 General Liability Release................................................    38
Article 33 - Transferability of Rights and Obligations.........................    39
 33.1 Binding Agreement........................................................    39
Article 34 - Patent Marking....................................................    39
 34.1 Patent Marking...........................................................    39
Article 35 - Publicity.........................................................    39
 35.1 Publicity................................................................    39
Article 36 - Independent Contractors...........................................    39
 36.1 Independent Contractors..................................................    39
Article 37 - Confidentiality...................................................    40
 37.1 Confidentiality..........................................................    40
 37.2 External Disclosure......................................................    40
Article 38 - Covenant Not To Compete...........................................    40
 38.1 Covenant Not To Compete..................................................    40
Article 39 - Certain Conditions Subsequent.....................................    41
 39.1 Preferred Stock Option and Purchase Agreement............................    41
 39.2 UKRF Letter Agreement....................................................    41
 39.3 Invention Disclosure/Assignment Agreements...............................    41
Article 40 - No Limit to Remedies..............................................    41
 40.1 No Limit to Remedies.....................................................    41
Article 41 - Counterparts......................................................    41
 41.1 Counterparts.............................................................    41

</TABLE>

                                       4
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

                               License Agreement
                               -----------------


     This License Agreement ("Agreement"), effective as of the 9th day of June,
1999, is made between Control Delivery Systems, Inc., a corporation organized
and existing under the laws of the State of Delaware and having its principal
place of business at 86 Rosedale Road, Watertown, Massachusetts 02172-2234
("Licensor") and Bausch & Lomb Incorporated, a corporation organized and
existing under the laws of the State of New York and having its principal place
of business at One Bausch & Lomb Place, Rochester, New York 14604 ("Licensee").
Collectively, Licensor and Licensee are "Parties" and, individually, a "Party."

Licensor owns or controls certain patent rights and other intellectual property
rights relating to drug delivery and other technologies to treat eye diseases.
Licensee desires to expand its capabilities in the field of treating eye
diseases and desires to obtain from Licensor a license under such patent rights
and other intellectual property rights owned or controlled by Licensor.
Therefore, intending to be legally bound and in consideration of the premises
and promises herein, the Parties agree as follows:

Article 1 -   Definitions:
------------  ------------
     In addition to the terms defined elsewhere in this Agreement, the following
terms shall have their associated meanings.

1.1 Additional R&D Payment. "Additional R&D Payment" means any payment made
by Licensee to Licensor pursuant to the provisions of Section 7.1 or 7.2.

1.2  Affiliate.  "Affiliate" of any Party means any Person that is controlled
by, controls, or is under common control with such Party, for so long as such
control relationship continues to exist.  "Control" as used in this definition
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management of a Person, whether through ownership of voting
securities, by contract, or otherwise.

1.3  Applicable Royalty.  "Applicable Royalty" shall mean the Base Royalty;
provided, however, that in the case of any Net Sale of a Licensed Product which
qualifies as a Licensed Product solely because it uses or incorporates Licensed
Know-how, Applicable Royalty shall mean [*].

1.4  B&L Licensed Product.  "B&L Licensed Product" means any Licensed Product
whose therapeutic effect is derived in part from any proprietary therapeutic
compound primarily and substantially developed or acquired on an arm's length
basis by Licensee outside the Research and Development Plan where (i) such
compound, prior to such development or acquisition, had not been approved by the
FDA for human use, (ii) such compound, prior to such development or acquisition,
had not to Licensee's knowledge been used in the eye (animal or human) to study
the effect of such compound, and (iii) Licensee performs or funds, outside the
Research and Development Plan, all product development and clinical trials and
secures all regulatory approvals with respect to such compound and its use in
the CDS delivery system.

                                       1
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

1.5 Base Royalty. "Base Royalty" means a running royalty of [*] of Net Sales,
provided, however, that if at any time Licensee notifies Licensor pursuant to
Section 7.2 that Licensee is terminating its obligation to provide the
Additional R&D Payments provided for in Section 7.1, or Licensee is other wise
no longer obligated to make such Additional R&D Payments, the Base Royalty shall
at all times be [*] of Net Sales.

1.6  CDS Indication.  "CDS Indication" means each of the following: (i) diabetic
macular edema, including proliferative diabetic retinopathy or "PDR"
(collectively, "DME"), (ii) age-related macular degeneration ("ARMD"), (iii)
uveitis (excluding anterior uveitis), and (iv) each additional ophthalmic
condition for which a Licensed Product other than a B&L Licensed Product is
commercially sold before a B&L Licensed Product is sold for such ophthalmic
condition.

1.7  CDS Licensed Product.  "CDS Licensed Product" means any Licensed Product
other than a B&L Licensed Product or a Third Party Licensed Product.

1.8  Clinical IP.  "Clinical IP" means (i) all clinical protocols, studies,
clinical data and results used in or resulting from any clinical trial of any
Licensed Product in the Licensed Field and (ii) all Investigational New Drug
Applications ("INDs"), New Drug Applications ("NDAs"), and other regulatory
applications and approvals regarding any Licensed Product in the Licensed Field.

1.9  Europe.  "Europe" means all countries of the European Economic Community
(Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden, and United Kingdom) plus
Switzerland and Norway, in the aggregate.

1.10  FDA.  "FDA" means the United States Food and Drug Administration.

1.11  Indication.  "Indication" means any CDS Indication or any Other
Indication.

1.12 Intermediate Market. "Intermediate Market" means [*] in the aggregate.

1.13  Invention.  "Invention" means a product(s), process(es), or system(s)
covered by any claim of any unexpired Licensed Patent and/or which employs any
of the Licensed Know-how.

1.14  Know-how.  "Know-how" means all technical information, processes,
formulae, trade secrets, materials, designs, drawings and data (including,
without limitation, pre-clinical and clinical data and all information contained
in any issued patent or patent application).

1.15  Licensed Field.  "Licensed Field" means any and all use for the treatment,
prevention and/or diagnosis of any disease, disorder and/or condition of the
eye, in humans or in animals.

                                       2
<PAGE>

1.16  Licensed Know-how.  "Licensed Know-how" means all Know-how now or
hereafter owned or controlled by Licensor which relates in any way to the
Licensed Field, provided, however, that Licensed Know-how shall not include any
Post-Termination Know-how.

1.17  Licensed Patents.  "Licensed Patents" mean those Patent Rights described
on the attached Exhibit 1.17 and any additional Patent Rights now or hereafter
owned or controlled by Licensor which relate in any way to the Licensed Field,
provided, however, that Licensed Patents shall not include any Post-Termination
Patents.

1.18  Licensed Product.  "Licensed Product" means any product whose manufacture,
use, sale or importation (i) would, absent the license granted by Licensor to
Licensee herein, infringe any Valid Claim included in any Licensed Patent,
and/or (ii) uses or incorporates Licensed Know-how.  Notwithstanding the
foregoing, Licensed Products shall not include the product known as "Vitrasert,"
which is subject to a separate agreement, dated December 31, 1992, between
Licensor and Chiron IntraOptics, Inc., as amended on or about August 1993, March
1995, June 1995, and December 1997 or any other product which would qualify as a
Licensed Product solely as a result of being covered by any claim contained in
Patent 5,378,475.

1.19  Licensed Territory.  "Licensed Territory" means the world.

1.20  Market.  "Market" means each of (i) the Target Markets, (ii) the
Intermediate Market, and (iii) the Other Market.

1.21  Net Sales.  "Net Sales" means, in any case where a Licensed Product is
sold or commercially disposed of for value by Licensee or any Sublicensee in an
arm's length transaction with a third party (other than an Affiliate of,
respectively, Licensee or Sublicensee), the gross invoice price for such
Licensed Product, less the following: (i) discounts, chargebacks, Medicare or
other government rebates, and rebates to purchasers actually taken or allowed;
(ii) credits or allowances given or made for rejections or return of any
previously sold Products actually taken or allowed; (iii) to the extent included
in such gross invoice price any tax or government charge imposed on the
production, import, export, sale, delivery or use of such Products, including,
without limitation, any value added or similar tax or government charge, but not
including any tax levied with respect to income; and (iv) to the extent included
in such gross invoice price any reasonable and documented packaging and
distribution charges.  Net Sales shall also include and be deemed to have been
made with respect to (a) any Licensed Product not sold or otherwise transferred
to any third party but rather used by Licensee or any Sublicensee to provide a
commercial service and (b) any other transfer of a Licensed Product for less
than arm's length value other than intercompany transfers where the transferee
is not the end user.  The amount of any Net Sale as defined in the preceding
sentence shall be imputed using the price or prices at which the Licensed
Product at issue is then being sold in transactions covered by the first
sentence of this section or, if no such transactions have occurred, on a
reasonable basis to be determined at the time by Steering Committee.
Notwithstanding any other provision of this Section, Net Sales shall not include
the transfer without consideration of any Licensed Product by Licensee or

                                       3
<PAGE>

any Sublicensee (x) for use in any clinical trial or in any preclinical or other
research, (y) as detailing samples or other use to promote additional Net Sales
in amounts consistent with the normal business practices of Licensee or any
Sublicensee, or (z) for compassionate use.

1.22  Other Indication.  "Other Indication" means any ophthalmic condition other
than a CDS Indication.

1.23  Other Market.  "Other Market" means any market other than the Target
Markets and the Intermediate Market.

1.24  Patent Rights.  "Patent Rights" mean any and all forms of patents issued
or granted anywhere in the world, including, without limitation, utility, model
and design patents, patents of addition, patents of importation, improvement
patents, reissued and reexamined patents, all renewals and extensions thereof,
and all applications for such patents (including original, divisional,
continuation and continuation-in-part applications) pending before any national
Patent Office and which have not been abandoned or expired.

1.25  PCT.  "PCT" means a clinical trial or later stage of development or
testing equivalent to a Phase III Clinical Trial or later stage of development
and testing in the United States (including, without limitation, commercial
sales).

1.26  Post-Termination Know-how.  "Post-Termination Know-how" means all Know-how
created, discovered, developed or acquired by Licensor at any time following the
delivery by Licensee of the notice contemplated by Section 7.2 terminating
Licensee's obligations to provide Additional R&D Payments, other than any and
all Know-how created, discovered or developed by Licensor in the course of
performing Post-Termination R&D, as such term is defined in Section 7.2.

1.27  Post-Termination Patents.  "Post-Termination Patents" means all Patent
Rights (i) related to any invention conceived and first reduced to practice by
Licensor or (ii) developed or acquired by Licensor, in each case at any time
following the delivery by Licensee of the notice contemplated by Section 7.2
terminating Licensee's obligations to provide Additional R&D Payments, other
than any and all Licensed Patents related to any invention conceived or first
reduced to practice by Licensor in the course of performing Post-Termination
R&D, as such term is defined in Section 7.2.

1.28  Person.  "Person" means any individual, partnership, association,
corporation, trust, or other legal person or entity.

1.29  Sublicense.  "Sublicense" means any sublicense of, or other agreement
permitting the commercial exploitation of, some or all of the rights granted to
Licensee under this Agreement.

1.30  Sublicensee.  "Sublicensee" means any Person with whom Licensee enters
into a Sublicense.

                                       4
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

1.31  Target Market.  "Target Market" means each of the [*].

1.32  Third Party Licensed Product.  "Third Party Licensed Product" means any
Licensed Product, except a B&L Licensed Product, whose therapeutic effect is
derived in part from any proprietary product, compound, method, or process
inlicensed or acquired by Licensee from an unAffiliated third party on an arm's-
length basis.

1.33  UKRF.  "UKRF" means University of Kentucky Research Foundation.

1.34  UKRF Licenses.  "UKRF Licenses" mean the licenses set forth in Exhibit

1.35  Valid Claim.  "Valid Claim" means (i) a claim (an "Issued Patent Claim")
of an issued and unexpired patent which has not been held permanently revoked,
unenforceable or invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealed or unappealable within the time allowed
for appeal, and which has not been admitted to be invalid or unenforceable
through reissue or disclaimer or otherwise, and/or (ii) a pending claim of any
pending patent application which has been filed and continues to be prosecuted
in good faith and is not abandoned or finally disallowed without the possibility
of appeal or refiling; provided, however, that, with respect to any Licensed
Product, no pending claim which has not become an Issued Patent Claim shall
continue to constitute a Valid Claim for more than five years following the
first approved commercial sale of the first Licensed Product which qualifies as
a Licensed Product under Section 1.18(i) solely as a result of such pending
claim.

Article 2 -   Granting Clause:
------------  ----------------

2.1  License Grant.  Licensor grants to Licensee, and Licensee accepts, an
exclusive, royalty-bearing, worldwide right and license, with the exclusive
right to sublicense, under Licensor's interest in (i.e., subject to the UKRF
Licenses) all of the Licensed Patents and the Licensed Know-how, to make, have
made, use, sell, offer to sell, and import Licensed Products in the Licensed
Field.

2.2  Sublicensing.  Licensee shall have the right to grant Sublicenses under the
license granted pursuant to Section 2.1, provided, however, that any such
Sublicense shall not be inconsistent with the terms and conditions of this
Agreement and that Licensee shall be responsible for the operations of any
Sublicensee relative to this Agreement as if such operations were carried out by
Licensee itself, including (without limitation) the payment of any royalties
provided for hereunder, regardless of whether the terms of any Sublicense
provide for such amount to be paid by the Sublicensee directly to Licensor, but
Sublicensees shall not be required to pay Milestones, research and development
payments pursuant to the Budget (as defined in Section 6.1), and Additional R&D
Payments.

2.3  Non-suit.  While the license granted hereby does not include the grant of
any right under Licensor's interest in the Post-Termination Know-how or Post-
Termination Patents, Licensor shall not bring (and shall not allow any third
party to bring) any action under any Post-Termination Know-how or any Post-
Termination Patent to block

                                       5
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

Licensee or any Sublicensee from exercising those rights (but only those rights)
granted by Licensor to Licensee under the Licensed Know-how and/or the Licensed
Patents (i) in this Article 2 and/or (ii) elsewhere under this Agreement.

Article 3 -   Royalties:
------------  ----------

3.1  Running Royalties.  Licensee shall pay running royalties to Licensor as
     -----------------
follows:

     3.1.1 Net Sales of CDS Licensed Products. Subject to Sections 3.1.4 and
     3.1.5, on all Net Sales of all Licensed Products other than B&L Licensed
     Products and Third Party Licensed Products, Licensee shall pay to Licensor
     a running royalty equal to the Base Royalty.

     3.1.2 Net Sales of Third Party Licensed Products. Subject to Sections 3.1.4
     and 3.1.5, on all Net Sales of any Third Party Licensed Product, Licensee
     shall pay to Licensor a running royalty equal to the Applicable Royalty
     reduced by [*] of the amount of any running royalty payable or "deemed paid
     or payable" by Licensee with respect to such Net Sales to any third party
     licensor of proprietary technology or other proprietary property included
     in such Third Party Licensed Product, provided, however, that the total
     running royalty due to Licensor with respect to such Net Sales shall in no
     event be less than [*] of the Applicable Royalty. Where Licensee acquires
     rights to a Third Party Licensed Product but doesn't pay a royalty based on
     net sales, units sold, etc., royalties "deemed paid or payable" shall be
     the imputed royalty paid by Licensee in connection with the payment of the
     purchase price or other consideration to acquire those rights needed to use
     the applicable proprietary product, compound, method, or process in such
     Third Party Licensed Product. Where Licensee acquires rights to such
     proprietary product, compound, method or process which permit Licensee to
     use such product, compound, method or process for purposes other than use
     in connection with such Third Party Licensed Product or where Licensee
     acquires the applicable proprietary product, compound, method or process in
     connection with the acquisition of any other rights or assets, a reasonably
     allocable share of such purchase price or other consideration shall be
     allocated to the right to use such product, compound, method or process in
     connection with such Third Party Licensed Product. The allocated portion of
     the purchase price or other consideration shall then be converted into an
     imputed royalty, taking into account all relevant factors, including,
     without limitation, the length of time over which Licensee may exercise the
     rights involved, the likely sales of such Third Party Licensed Product over
     such period of time, and/or other factors considered relevant at the time.
     In no event shall the deemed royalty so derived exceed the royalty that
     would have been paid for the rights involved in an arms-length transaction
     with such third party had Licensee licensed such rights for use in
     connection with such Third Party Licensed Product on a purely royalty-
     bearing basis. If Licensor and Licensee cannot agree on the amount of any
     deemed royalty, the issue shall be resolved by the dispute resolution
     provisions of this Agreement.

                                       6
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

     3.1.3 Net Sales of B&L Licensed Products. Except as otherwise provided
     below in Sections 3.1.3.2 and 3.1.3.3 in regard to certain Net Sales of B&L
     Licensed Products and, subject to Sections 3.1.4 and 3.1.5, on all Net
     Sales of B&L Licensed Products, Licensee shall pay to Licensor a running
     royalty equal to [*] of the Applicable Royalty.

          3.1.3.1 Initial Approved Sale. "Initial Approved Sale" shall mean,
          with respect to any specific Indication in any specific Market (i.e.,
          one of the five (5) Markets), the first commercial sale of the first
          Licensed Product (whether such Licensed Product be a CDS Licensed
          Product, a Third Party Licensed Product or a B&L Licensed Product)
          approved for sale for such Indication in such Market. As a result,
          there can be only one Initial Approved Sale for each Indication in
          each Market. The "Initial Approved Sale Date" for an Indication in a
          Market shall mean the date of the Initial Approved Sale for such
          Indication in such Market.

          3.1.3.2 Increased Royalties Applicable on Net Sales of a B&L Licensed
          Product Where CDS Licensed Product is in PCT at Time of First Sale of
          a B&L Licensed Product. If, at the time of the first approved
          commercial sale of a B&L Licensed Product in a specific Indication (a
          "Specified Indication") in a specific Market (a "Specified Market"), a
          CDS Licensed Product is in a PCT for that Specified Indication in any
          Target Market, the royalty payable with respect to Net Sales of such
          B&L Licensed Product in any Specified Market occurring at any time
          during the seven years after the Initial Approved Sale Date for such
          Specified Indication in such Specified Market shall be increased as
          follows: For all Net Sales occurring during the first five years
          following such Initial Approved Sale Date, the royalty payable shall
          be [*] of the Applicable Royalty (subject to the provisions of
          Sections 3.1.4) and for all Net Sales occurring during the sixth and
          seventh year following such Initial Approved Sale Date the royalty
          payable shall be [*] of the Applicable Royalty (subject to the
          provisions of Section 3.1.4).

          3.1.3.3 Increased Royalties Applicable on Net Sales of a B&L Licensed
          Product Where a Third Party Licensed Product is in a PCT at Time of
          First Sale of Such B&L Licensed Product. If, at the time of the first
          approved commercial sale of a B&L Licensed Product in a specific
          Indication (a "Specified Indication") in a specific Market (a
          "Specified Market"), a Third Party Licensed Product is in a PCT for
          that Specified Indication in any Target Market, the royalty payable
          with respect to Net Sales of such B&L Licensed Product in any
          Specified Market occurring at any time during the seven years after
          the Initial Approved Sale Date for such Specified Indication in such
          Specified Market shall be increased as follows: For all Net Sales
          occurring during

                                       7
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

          the first five years following such Initial Approved Sale Date, the
          royalty payable shall be [*] of the royalty payable with respect to
          such Third Party Licensed Product (subject to the provisions of
          Section 3.1.4), and for all Net Sales occurring during the sixth and
          seventh years following such Initial Approved Sale Date the royalty
          payable shall be [*] of the royalty payable with respect to such Third
          Party Licensed Product (subject to the provisions of Section 3.1.4).

          3.1.3.4 Royalty where CDS Licensed Product and a Third Party Licensed
          Product Are in a PCT. If, at the time of the first approved commercial
          sale of a B&L Licensed Product in a Specified Indication in a
          Specified Market, there exists both a CDS Licensed Product in a PCT
          for that Specified Indication in any Target Market and a Third Party
          Licensed Product in a PCT for that Specified Indication in any Target
          Market, the royalty applicable to Net Sales of such B&L Licensed
          Product shall be as set forth in Section 3.1.3.3 if the Third Party
          Licensed Product entered a PCT for that Specified Indication earlier
          than the CDS Licensed Product; otherwise the royalty shall be as set
          forth in Section 3.1.3.2.

          3.1.3.5 Required Activity in a Market Before Higher Protected Royalty
          Due. Notwithstanding the foregoing, Licensee shall not be required to
          pay a higher royalty pursuant to Sections 3.1.3.2 and 3.1.3.3 on Net
          Sales of a B&L Licensed Product in a Specified Indication in a
          Specified Market where, at the time of the first approved commercial
          sale of such B&L Licensed Product for such Specified Indication in
          such Specified Market the Steering Committee had determined pursuant
          to the then most current Research and Development Plan not to sell for
          such Specified Indication in such Specified Market the CDS Licensed
          Product or Third Party Licensed Product whose PCT status in such
          Specified Indication would otherwise result in the payment of such
          higher royalty.

     3.1.4 Net Sales in Countries Without Patent Protection. Notwithstanding
     anything in this Agreement to the contrary, in any country where the
     manufacture, use, or sale of a Licensed Product is not covered by an Issued
     Patent Claim (as defined in Section 1.35), if the aggregate Net Sales of
     such Licensed Product in such country equal less than three times the
     aggregate dollar amount (as reasonably determined by Licensee based on
     available market data, without the requirement that Licensee conduct any
     detailed market survey unless Licensor agrees to pay for such survey) of
     all sales in such country by all unlicensed third parties of any one or
     more substantially identical product or products that compete in the same
     market segment as such Licensed Product and which include the same active
     ingredient as such Licensed Product, no running royalty whatsoever shall be
     payable by Licensee to Licensor hereunder with respect to any Net Sales of
     such Licensed Product in such country for so long as such condition with
     respect to sales continues to exist in such country. Licensee shall review
     its aggregate Net Sales compared to those of unlicensed third parties in
     any such country at least every twelve (12) months after the date of the
     first commercial sale of the Licensed Product in such country to determine
     if such condition continues to exist.

                                       8
<PAGE>

     3.1.5 Royalties Payable Only Once. Licensee's obligation to pay royalties
     under this Article 3 shall be imposed only once at the highest applicable
     royalty rate, with respect to any Net Sale of any Licensed Product. Only a
     single royalty shall be due and payable by Licensee under this Agreement
     with respect to a Licensed Product regardless of whether the Licensed
     Product is covered by more than one claim of a licensed Patent Right.

3.2  Timing of Royalty Payments.  Within thirty (30) days after the end of each
fiscal quarter of Licensee, Licensee shall pay to Licensor the royalty payment
due for each such quarter in U.S. dollars, provided, however, that solely with
respect to any royalty payment due with respect to Net Sales made by any
Sublicensee in any Market other than the United States, such thirty (30) day
period may be extended to such longer period as Licensee may reasonably require,
not to exceed ninety (90) days, to determine the amount of such Net Sales for
such fiscal quarter.  If a Sublicensee adjusts any of its Net Sales for any,
applicable quarter on account of misreported or late-reported Net Sales,
Licensee shall promptly pay (or cause the Sublicensee to pay) any royalties due
within 30 days after such adjustment.  If Net Sales are in a currency other than
U.S. Dollars, the royalty shall be expressed in U.S. Dollars, with conversion to
be made at a conversion rate based on rates published in The Wall Street
Journal, East Coast Edition.  The conversion rate for each such non-U.S. Dollar
currency shall be the currency value on the Thursday preceding the last business
day of each Licensee fiscal month in each fiscal quarter as determined by
reference to The Wall Street Journal, but weighted by the Net Sales for each
such month.  If any royalty or other amount due Licensor is in a non-U.S. Dollar
currency, and Licensee or any Sublicensee is prohibited from exporting that
currency from that jurisdiction, Licensee or such Sublicensee shall pay an
amount equal to the royalty or other amount due in such blocked currency into a
bank account of Licensor's choice in such jurisdiction, and such deposit shall
be deemed to be full satisfaction of Licensee and Sublicensee's obligation to
make the applicable payment to Licensor.

3.3  Withholding Taxes.  Licensee and Licensor shall use all commercially
reasonable and legal efforts to reduce tax withholding on any payments to be
made to Licensor hereunder.  If Licensee concludes that, notwithstanding such
efforts, tax withholding under the laws of any country is required with respect
to any royalty payment to be made to Licensor under this Agreement, Licensee
shall cause its Sublicensee to pay any applicable withholding taxes imposed by
any such political jurisdiction on such royalty payments, and the amount of any
such payments shall be credited against Licensee's royalty obligation under this
Agreement.  Licensee shall promptly provide Licensor with, or promptly cause
Licensor to be provided with, original receipts or other evidence sufficient to
allow Licensor to obtain the benefits of any such tax withholding.

Article 4 -   License and Maintenance Fees:
------------  -----------------------------

4.1  License and Maintenance Fees.  Licensee shall pay one-time license and
maintenance fees ("Milestone Payments") for the achievement of certain goals,
and, upon execution of this Agreement, Licensee shall begin to reimburse
Licensor for its costs incurred for research and development as set forth in
Article 6.  Licensee shall pay to

                                       9
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

Licensor a one-time initial license fee with respect to U.S. Patent No.
5,773,019 (covers lead uveitis product) in the amount of [*] upon execution
of this Agreement and shall pay to Licensor an additional [*] as a further
one-time license maintenance fee with respect to such Patent on the first
anniversary of this Agreement. Licensee shall pay to Licensor a one-time initial
license fee with respect to U.S. Patent No. 5,902,598 (covers lead ARMD/DME
product) in the amount of [*] upon execution of this Agreement and shall
pay to Licensor an additional [*] as a further one-time license maintenance
fee with respect to such Patent on the first anniversary of this Agreement.
Licensee shall also make the Milestone Payments set forth in Exhibit 4.1 to
Licensor within ten (10) business days after each of the events specified in
Exhibit 4.1.

Article 5 -   Development of Licensed Products:
------------  ---------------------------------

5.1  Joint Diligence Obligation.  Licensor and Licensee shall both use
reasonable commercial efforts to comply with all diligence obligations under the
UKRF Licenses to the extent required by the UKRF Licenses.

5.2  Licensee's General Diligence Obligations.  Licensee shall use commercially
reasonable efforts (which shall not be less than the efforts expended by
Licensee on its own proprietary development projects) (i) to develop and
commercialize Licensed Products, including, without limitation, taking all
actions for which Licensee is responsible under the Research and Development
Plan (as defined below) and (ii) to introduce those Licensed Products covered by
the Research and Development Plan into the United States, Europe, Japan and the
Intermediate Market as soon as practical, consistent with commercially
reasonable business practices and judgments.

5.3  Licensor's General Diligence Obligations.  Licensor shall use commercially
reasonable efforts (which shall not be less than the efforts expended by
Licensor on its other proprietary research and development projects) to develop
Licensed Products and to conduct further research and development in the
Licensed Field, including, without limitation, taking all actions for which
Licensor is responsible under the Research and Development Plan (as defined
below), provided, however, that, while Licensor may in its discretion determine
to do so, Licensor shall have no obligation to perform any research and
development in the Licensed Field or take any other actions required by the
Research and Development Plan after December 31, 2003, except to the extent that
funding for such research and development and other actions is available from
Additional R&D Payments or any other funding provided by Licensee for such
research and development and other actions, except to the extent that the
Research and Development Plan expressly provides, in regard to a specific action
to be taken by Licensor, that such action is to be taken by Licensor regardless
of whether funding for such action is available from the Additional R&D Payments
or otherwise from Licensee.

5.4  Steering Committee.  The Steering Committee shall be composed of two
representatives each from Licensor and Licensee.  The initial representatives of
each Party are set forth on Exhibit 5.4.  A Party may change its
representative(s) upon notice.  The Steering Committee shall only conduct
business when a quorum (i.e., an equal number of the representatives of each
Party) is present.  The Steering Committee shall

                                       10
<PAGE>

meet at least once each calendar quarter and in any event when at least two
members call a meeting. Absent compelling reasons otherwise, venues will rotate
between Licensor's offices and Licensee's offices. Meetings of the Steering
Committee may also be conveyed by way of telephone or video conference. Minutes
shall be maintained of the proceedings of the Steering Committee. All decisions
of the Steering Committee shall be made by the affirmative vote of three or more
members of the Steering Committee. The Steering Committee may not enter into any
contract or other arrangement imposing any binding obligation upon a Party
except as may be expressly authorized by a provision of this Agreement.

5.5  Dispute Resolution.  In the event the Steering Committee, after using
reasonable efforts to resolve any dispute amicably based on the achievement of
the objectives of the development efforts, is unable to resolve any
disagreement, the dispute resolution mechanisms in Article 26 shall apply.

5.6  Research and Development Plan.  Attached as Exhibit 5.6 is the initial
Research and Development Plan (as modified or amended from time to time by the
Steering Committee, the "Research and Development Plan"), which sets forth, for
the period from the date of this Agreement through December 31, 2003, a clinical
trial and regulatory approval strategy and time line for each Licensed Product
described therein, and which indicates which Party shall have responsibility for
the various development and other activities specified therein.  The initial
Research and Development Plan is designed, and any future modifications to the
Research and Development Plan will be designed, to achieve mutually agreed
regulatory approvals in the shortest time practicable, consistent with agreed-
upon clinical and regulatory end-points and to provide for the successful
commercialization of the Licensed Products described in the Research and
Development Plan.

5.7  Monitoring.  The Steering Committee shall monitor projects under the
Research and Development Plan and may modify the Research and Development Plan
as appropriate.  Prior to September 30 in each year during the term of this
Agreement, the Steering Committee will conduct an annual review of the progress
of the development of the Licensed Products, will review and approve as required
a revised Research and Development Plan for the next three calendar years on a
quarter-by-quarter basis and will take such other mutually agreeable actions as
may be reasonable to facilitate the commercial success of the Licensed Products.

5.8  Technical Assistance.  To the extent described in the Research and
Development Plan and, after 2003, to the extent that Licensor's cost of
fulfilling its obligations under this Section are covered by the Additional R&D
Payments or reimbursed by Licensee, Licensor shall give Licensee, as Licensee
may from time to time request, all documentation, technical assistance,
engineering services, scientific assistance, and similar services and advice as
to the formulation, testing, use and manufacture of Licensed Products as
provided for in this Agreement and, in particular, but without limiting the
generality of the foregoing, shall from time to time and at the request of
Licensee and so far as Licensor can reasonably make the necessary arrangements,
take the following actions:

                                       11
<PAGE>

     (i)  Furnish to Licensee the services of such competent specialist (and in
     particular, technical advisers) as may reasonably be required by Licensee
     and be conveniently furnished by Licensor.

     (ii) At any specific written request by Licensee, permit any duly
     authorized employees of Licensee (for periods not to exceed two (2) weeks
     for each visit and at times mutually convenient to both Parties) to visit
     Licensor's laboratories and facilities.

5.9  Licensor's Conduct of Ophthalmic Research and Development.  Licensor shall
conduct all of its ophthalmic research and development through Licensor's
employees or under Licensor or Licensee-sponsored research or other agreements
with third parties and not through any of Licensor's Affiliates.

Article 6 -   Payment of Research and Development Costs:
------------  ------------------------------------------

6.1  Budget.  Attached as Exhibit 6.1 is the initial Budget (as modified or
amended from time to time by the Steering Committee, the "Budget"), which sets
forth, for the period from the date of this Agreement through December 31, 2003,
on a quarter-by-quarter basis, the budget for development of each Licensed
Product whose development during such time period is provided for under the
Research and Development Plan.  The Budget shall also specifically allocate the
costs to be incurred by Licensee and by Licensor for the period covered in the
Budget broken down on a Licensed Product-by-Licensed Product basis and on a
quarter-by-quarter basis (using Licensee's fiscal quarters).  The Steering
Committee shall monitor the actual costs incurred by Licensee and Licensor in
fulfilling their obligations under this Agreement against the amounts specified
in the Budget and may modify the Budget as appropriate.  Prior to September 30
for each calendar year up to and through 2002, the Steering Committee, will
conduct an annual review of the actual costs incurred by Licensee and Licensor
against the amounts included in the Budget and shall review and approve a
modified Budget (if required) reflecting any changes to the Budget agreed to by
the Steering Committee covering the remaining period covered by the Budget
(through December 31, 2003).  Ten (10) days before the start of each Licensee
fiscal quarter through the last quarter of 2003, Licensee shall pay to Licensor
the amount allocated in the Budget to Licensor for its activities for the
upcoming quarter.  If there is an overpayment to Licensor for any quarter, i.e.,
if Licensor's actual costs in performing its obligations under the Research and
Development Plan (as reasonably determined by Licensor on a basis consistent
with the basis used to develop the Budget) in any quarter are less than the
amount paid to Licensor by Licensee pursuant to the Budget for such quarter,
Licensee may, at its option, require repayment of the excess amount or offset
the excess amount against the next quarterly payment owed by Licensee to
Licensor, provided, however, that if Licensor's actual costs for any quarter (as
determined above) exceed the amount allocated in the Budget to Licensor and paid
to Licensor by Licensee with respect to such quarter, Licensee shall reimburse
Licensor for such deficit amount in an amount not to exceed the aggregate amount
of (i) all previous excess payments repaid to Licensee or offset by Licensee as
provided above reduced by (ii) all amounts previously so reimbursed to Licensor
and any amounts previously agreed to be permanent savings by the Steering

                                       12
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

Committee.  The provisions of the foregoing sentence shall not apply to any
payments designated in the Budget as not subject to the reimbursement provisions
of this Section.  Licensor shall maintain records regarding its costs, and
Licensee shall have the audit rights specified in Section 9.4 with respect to
such costs.  If the amounts to be spent under the Budget are not spent by the
end of 2003 as a result of a delay, a decision by Licensee to provide further
funding, or other cause, the Parties shall continue to prepare and work with an
amended Budget as contemplated by this Section, but subject to any funding
limitations of Licensee.

6.2  Limit.  Unless otherwise agreed by the Steering Committee, Licensee's
obligation to continue funding Licensor's research and development for uveitis,
DME and ARMD shall not continue past December 31, 2003, although Licensee shall
still pay remaining Milestone Payments, post-commercialization Research and
Development Funding, and Regulatory Approval Expenses (described below in
Article 7).  Licensor shall not, however, be relieved of its obligation to
continue with its research and development for uveitis, ARMD and DME as
described in the Research and Development Plan to the extent required by Section
5.3.

Article 7 -   Post Commercialization Research: Regulatory Approval Expenses:
------------  --------------------------------------------------------------

7.1 Post-Commercialization Research: Additional R&D Payments. In addition to the
other amounts paid hereunder, Licensee shall provide Licensor with additional
funding for Licensor's ophthalmic R&D in an amount equal to [*] of all Net Sales
of Licensed Products by Licensee or any Affiliate plus [*] of any other net
revenues (including net of any royalties payable to Licensor hereunder) realized
by Licensee on a consolidated basis with respect to sales to Sublicensees or
sublicensing of technology licensed by Licensor to Licensee hereunder (e.g.,
royalties or license fees). Licensor shall use all such Additional R&D Payments
to perform or have performed research and development in the Licensed Field in
accordance with the Research and Development Plan. Subject to Section 3.2, the
research support provided for in this Section shall be paid within thirty (30)
days after the end of each of Licensee's fiscal quarters. Notwithstanding any
other provision of this Agreement, the Additional R&D Payments shall not exceed
[*] in any twelve (12)-month period as measured from the date of first
commercial sale of the first Licensed Product ("12-Month Period").

7.2  Termination of Additional R&D Payments.  Licensee may terminate its
obligation to pay Additional R&D Payments at any time by delivering to Licensor
a written notice to such effect (the "Additional R&D Termination Notice").  Upon
delivery of such Notice or of a notice of termination without cause pursuant to
Section 14.4.2, Licensee shall be obligated to pay to Licensor the payments
provided in Section 7.1 over the one hundred eighty (180) days following such
notice (the "Notice Period"); provided, however, that in no event shall
Licensee's obligation under this sentence exceed the least of (i) budgeted
expenses in the then-current Research and Development Plan for the Notice
Period, (ii) $5 million, or (iii) the sum of Licensor's Wind-Down Costs and
Licensor's Post-Termination R&D Costs, as defined below, but in no event shall
Licensee be obligated to pay more than the amount specified in the last sentence
of Section 7.1.  Licensor's

                                       13
<PAGE>

Wind-Down Costs shall mean all reasonable costs actually incurred by Licensor
during the Notice Period in winding down any activities being conducted under
the Research and Development Plan at the time of such Additional R&D Termination
Notice (including, without limitation, severance costs for terminating any and
all employees or consultants, costs of terminating any clinical trial or other
contracts, and any similar costs). Licensor's Post-Termination R&D Costs shall
mean any and all reasonable expenses incurred by Licensor in conducting any
research or development activities described in the Research and Development
Plan in effect at the time of such Notice which were expected to be funded by
Additional R&D Payments and which Licensor notifies Licensee that Licensor
wishes to continue to fund using the payments provided for in this Section 7.2
during the Notice Period (any such research and development activities which
Licensor notifies Licensee that Licensor wishes to so fund are referred to
herein as "Post-Termination Research and Development"). All Wind-Down Costs and
Post-Termination R&D Costs shall be subject to Licensee's audit rights pursuant
to Section 9.4.

7.3  Regulatory Approval Expenses.  Following the expenditure of the amounts set
forth in Section 6.1 and in the Budget through 2003, Licensee shall pay any
remaining out-of-pocket costs necessary to obtain final regulatory approval for
the Licensed Products for uveitis, ARMD and DME, but not including PDR.  Such
Regulatory Approval Expenses shall include, for example, filing fees, user fees,
cost of consultants and experts familiar with applicable regulatory processes,
copying and telecommunications charges, etc.  However, such Expenses shall not
include the costs of any necessary or desirable research or similar activities,
which shall be funded through the Additional R&D payments described in this
Article 7.

Article 8 -   Performance Obligations:
------------  ------------------------

8.1  Market Projection Plan.  Attached as Exhibit 8.1 is a draft Market
Projection Plan.  The Steering Committee shall monitor market conditions and
other factors, including progress under the Research and Development Plan, and
shall, no later than September 30, 1999, adopt an initial Market Projection Plan
(as modified or amended from time to time by the Steering Committee as provided
herein, the "Market Projection Plan") for each of the five (5) Markets (i.e.,
the three (3) Target Markets, the Intermediate Market, and the Other Markets).
The Steering Committee no later than September 30 in each year during the term
of this Agreement shall update the Market Projection Plan for each Licensed
Product (other than a B&L Licensed Product) for each Market.  The Market
Projection Plans will establish mutually agreed target sales projections
consistent with agreed upon market and sales information and research for each
applicable Licensed Product (other than a B&L Licensed Product) showing expected
Net Sales of such Licensed Product in each Market for the first thirty-six (36)
months following the introduction of such Licensed Product, as well as market
projections for world-wide Net Sales of each such Licensed Product for each of
the three twelve (12)-month periods (each a "12-Month Period") covered by the
Market-by-Market projections.  As modified from time to time by the Steering
Committee, the applicable Market Projection Plan(s) shall reflect the impact of
any contemplated introduction of any B&L Licensed Product or any Third Party
Licensed Product which is expected to compete with any other Licensed Product.
The Market Projection Plan for the initial 12-Month Period for any

                                       14
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

applicable Licensed Product for a Market must be dated not earlier than sixty
(60) days before the first approved sale of such Licensed Product in such
Market. Where practicable, the Steering Committee shall use 12-month rolling
forecasts in the Market Projection Plans. The Steering Committee may include
projections of the sale of Licensed Products in a CDS Indication in a Market
Projection Plan, but the Parties acknowledge that Licensee's Performance
Minimums described in Section 8.2 shall be measured against sales of Licensed
Products without regard to Indications.

8.2  Performance Minimums.  Subject to Section 8.3, the Performance Minimums
defined below shall apply to all five (5) Markets but only to two (2) Licensed
Products (which shall not include B&L Licensed Products or a Third Party
Licensed Products) approved by the applicable regulatory authority for sale in a
CDS Indication as follows: the Immusert Product (Cyclosporine) when approved for
uveitis in a Market ("Immusert") and the first CDS Licensed Product when
approved in a Market by the applicable regulatory authority for sale for ARMD or
DME, whichever occurs first ("ARMD/DME Product").  It is understood, however,
that although the Immusert and ARMD/DME Products are based on Indications and
are referred to independently in this Section, any Performance Minimums will be
measured against sales of all Indications for each Licensed Product and not just
the separate Indications of uveitis or ARMD/DME.  Furthermore, the Performance
Minimums for the European Target Market for Immusert and the ARMD/DME Product,
treated separately and independently, shall not apply until each of them,
respectively, is approved for sale in at least three (3) of the following
countries in Europe: France, Germany, Italy, and the United Kingdom.  Subject to
Section 8.3, during each of the first three (3) 12-Month Periods following the
first approved commercial sale for each of the Immusert and ARMD/DME Products in
a Market ("Approved Market"), Licensee shall either (i) obtain Net Sales for
such Product in such Approved Market equal to at least [*] of the projected Net
Sales for such Product in such Market contained in the applicable Market
Projection Plan approved by the Steering Committee prior to such first
commercial sale (the "Performance Minimum"), or (ii) pay to Licensor a royalty
equal to the amount Licensor would have received based on the achievement during
the applicable 12-Month Period of the Performance 12inimum ("Minimum Payment").
If Licensee has made the applicable Minimum Payment for Immusert and the
ARMD/DME Product (each treated separately and independently) in an Approved
Market and subsequent information indicates that the Net Sales on which such
Minimum Payment was made were underreported, Licensee shall be entitled to
offset the excess Minimum Payment against any royalties due and, if applicable,
against any Additional R&D Payments which might subsequently be due.  If
Licensee fails to achieve the Performance Minimum for Immusert and the ARMD/DME
Product (each treated separately and independently) in any applicable 12-Month
Period for any Approved Market, then Licensee shall have forty-five (45) days
from the last day of the last month of the end of the applicable 12-Month Period
to pay the amount due to achieve the Minimum Payment for the Product(s) for such
Approved Market for such Period.  If Licensee does not pay such amount, Licensor
shall have one hundred thirty-five (135) days after the end of the forty-five
(45)-day period in which to give Licensee written notice that Licensee's rights
under this Agreement for the applicable Product(s) in the applicable Approved
Market will be nonexclusive as of the date ninety (90) days following the date
of such notice from Licensor.  If Licensor does not so notify Licensee

                                       15
<PAGE>

in writing within the one hundred thirty-five (135) day period, Licensee's
rights with respect to such Product(s) in such Market shall remain exclusive for
the next 12-Month Period in the 36-month period to which Performance Minimums
apply.

8.3  Aggregation of Minimum Payment Obligations.  The Parties acknowledge that
at any specified time Licensee may have Minimum Payment obligations for the
Immusert and/or ARMD/DME Product in more than one Approved Market, and that the
intent of this Agreement is to provide Licensor with an acceptable level of
Minimum Payments in the aggregate across all Markets, and not for each Approved
Market individually, as described in the example below.

In particular (and for example), if the Immusert Product were to be approved for
the U.S. Market on January 1, 2001, for the European Market on July 1, 2001, for
the Intermediate Market on February 1, 2002, for the Japanese Market on October
1, 2002, and for the Other Markets on January 1, 2006, the first 12-Month Period
for the Immusert Product will be for calendar year 2001.  However, when
determining whether Licensee has met its Performance Minimum for the Immusert
Product for the first 12-Month Period in an Approved Market, Net Sales for all
twelve (12) months in the U.S. Market shall be aggregated with the six (6)
months of Net Sales in the European Market.  To continue with the example, when
determining whether Licensee has met its Performance Minimum for the Immusert
Product for its second 12-Month Period in an Approved Market (i.e., for the
twelve (12) months of the year 2002 for the U.S. Market), Net Sales in each of
the U.S. Market, the European Market, the Intermediate Market, and the Japanese
Market occurring in 2002 would be aggregated.  Furthermore, and continuing the
example, when determining whether Licensee has met its Performance Minimum for
the Immusert Product for the first 12-Month Period in the European Market (i.e.,
from July 1, 2001 to June 30, 2002), Net Sales in each of the U.S. Market, the
European Market, and the Intermediate Market during such 12-Month Period would
be aggregated.  To clarify, Net Sales from the Japanese Market would not be
aggregated because they would not have started until October 1, 2002, three (3)
months after the first 12-Month Period for the Immusert Product in the European
Market.  However, the Net Sales in the Japanese Market would be used in
determining whether Licensee had met its Performance Minimum for the third 12-
Month Period in the U.S. Market and the second 12-Month Period in the European
Market.

Continuing with the example, after December 31, 2003, Licensee would have no
Performance Minimums for the U.S. Market for the Immusert Product.  However, the
Net Sales in the U.S. Market shall still be aggregated with sales in the
European Market, the Intermediate Market, and the Japanese Market to determine
whether Licensee has met its Performance Minimums for the Immusert Product for
any Approved Market for which the 36-Month Period has not expired.  In addition,
and notwithstanding Section 8.2, if the aggregate royalties on Net Sales of the
Inunusert Product in all Approved Markets paid to Licensor for any 12-Month
Period still within the 36-Month Period are at least equal to the sum of the
Minimum Payments otherwise due for the Immusert Product for such period across
all Approved Markets, then Licensee shall not lose its exclusivity rights with
respect to the Immusert Product in any Market for the next 12-Month Period in
the 36-Month Period to which Performance Minimums apply.  Finally, if Licensee
achieves the Performance Minimums for all but the Other Market during any
applicable 12-Month Period within the applicable 36-Month Period, Licensee shall
not lose its exclusivity

                                       16
<PAGE>

rights with respect to the Immusert Product in the Other Market for the next 12-
Month Period or shorter remaining time in the applicable 36-Month Period.

The above analysis shall apply equally to the ARMD/DME Product.

     8.4 Marketing Obligations. During the term of this Agreement, Licensee and
     its Affiliates shall use commercially reasonable efforts, consistent with
     the efforts expended by Licensee with respect to its own proprietary
     ophthalmic products to:

1.   Market, sell, distribute, and support the Licensed Products, including,
     without limitation, establishing, directly or through Sublicensees, an
     adequate sales force in each Target Market;

2.   Obtain third party reimbursement for the Licensed Products, where
     applicable;

3.   Maintain and provide Licensor with such sales and other information
     customarily maintained by Licensee for purposes of monitoring sales
     progress on a country-by-country basis;

4.   Keep Licensor promptly and fully informed of developments in the Markets
     where Licensed Products are being sold; and

5.   Comply with export laws and restrictions and regulations of the Department
     of Commerce or other United States or foreign agency or authority.

Nothing contained in this Section 8.4 shall limit any other obligations Licensee
may have under this Agreement.

Article 9 -   Reporting and Accounting Provisions:
------------  ------------------------------------

9.1  Report.  Licensee shall make written reports to Licensor quarterly within
thirty (30) days after (and as of) the first day of each January, April, July,
and October during the term of this Agreement, stating in each such report the
number, description, and aggregate Net Sales of each Licensed Product sold
during the preceding three (3) fiscal months of Licensee and upon which a
royalty is payable as provided in Article 3 (on a Licensed Product-by-Licensed
Product and Market-by-Market basis and, if relevant to the determination of any
payment to be made hereunder, on a country-by-country basis as well, together
with any information relevant to determination of any amount payable under
Sections 7.1 and 7.2), provided, however, that solely with respect to any report
with respect to Net Sales made by any Sublicensee in any Market other than the
United States, such thirty (30) day period may be extended to such longer period
as Licensee may reasonably require, not to exceed ninety (90) days, to determine
the amount of such Net Sales for such fiscal quarter.  The first such report
shall include all such Products so sold prior to the date of such report.

9.2  Record Keeping by Licensee.  Licensee shall keep records showing the sales
of Licensed Products, B&L Licensed Products, and Third Party Licensed Products
in

                                       17
<PAGE>

sufficient detail to enable the royalties payable hereunder to be determined.
Licensee shall permit its books and records to be examined at Licensor's expense
by an independent auditor chosen by Licensor and reasonably acceptable to
Licensee during regular business hours and upon reasonable advance notice, but
not later than two years following the rendering of any written report and no
more often than once per calendar year.  Such audit shall be permitted only to
the extent necessary to verify the reports provided for in this Article 9.  The
auditor shall report to Licensor only the amount of royalty payable for the
period under audit and shall keep confidential any information learned or
obtained during the examination.  If the audit shows an underpayment of more
than the greater of (i) $50,000, or (ii) five percent (5%) of the amount
otherwise due, Licensee shall reimburse Licensor for the reasonable costs of the
audit.  Licensee shall promptly remit any underpayment to Licensor.  If the
audit shows an overpayment, Licensor shall promptly pay such overpayment amount
to Licensee upon request, or, at Licensee's election, Licensee may offset such
amount against the next payment of royalties or other amounts due Licensor
hereunder.

9.3  Termination Report.  Licensee also shall make a written report to Licensor
within thirty (30) days after the date of any termination of this Agreement
providing to Licensor the same information described in Section 9.1 with respect
to any Net Sales which were not previously reported to Licensor.

9.4  Record Keeping by Licensor.  Licensor shall keep records showing Licensors
cost of performing its obligations under the Research and Development Plan in
reasonable detail.  Licensor shall permit its books and records to be examined
at Licensee's expense by an independent auditor chosen by Licensee and
reasonably acceptable to Licensor during regular business hours and upon
reasonable advance notice, but not later than two years following the rendering
of any written report of such costs and no more often than once per calendar
year.  Such audit shall be permitted only to the extent necessary to verify the
costs reported as provided for in this Section 9.4.  The auditor shall report to
Licensee only the amount of costs incurred for the period under audit and shall
keep confidential any information learned or obtained during the examination.
If the audit shows that Licensor's actual costs are less than the Budget for
such costs, Licensor shall promptly remit such difference ("Difference") to
Licensee unless Licensee chooses to recover such amount pursuant to Section 6.1
of this Agreement.  Furthermore, if Licensee is responsible for any Wind Down
Costs or Post-Termination R&D Costs during the Notice Period pursuant to Section
7.2 or Expenses pursuant to Section 7.3, the auditor shall, in a similar manner,
verify such costs or Expenses to Licensee.  Licensor shall reimburse Licensee
for the cost of any audit if the Difference is more than the greater of: (i)
$50,000, or (ii) five percent (5%) of the Budget.

Article 10 -   Favored Nation:
-------------  ---------------

10.1  Favored Nation.  If Licensee fails to meet its Performance Minimums under
Article 8 and, as a consequence, Licensee's rights under this Agreement become
non-exclusive with respect to a Licensed Product in an Approved Market, and
Licensor enters into an agreement or other arrangement with any Person other
than Licensee granting a non-exclusive license in the Licensed Field under the
Licensed Patents and/or Licensed

                                       18
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

Know-how to such Person to market such Licensed Product in such Approved Market
for a royalty and/or other consideration in the aggregate lower than the royalty
and other consideration then applicable with respect to Net Sales of such
Licensed Product in such Approved Market under Article 3 hereof, Licensor shall
advise Licensee promptly of such lower royalty rate and/or consideration (and
for these purposes any non-monetary consideration shall be valued at its fair
market present value), and Licensee shall then have the right to substitute into
this Agreement (for so long as such condition continues to exist) such lower
royalty and/or other consideration as applicable to Net Sales of such Licensed
Product in such Approved Market under Article 3 hereof, such right to be
exercisable within thirty (30) days after Licensee's receipt of such notice from
Licensor. The Budget, Licensor's Milestone Payments, and Licensee's Additional
R&D Payments shall not be considered in any analysis under this Section.

Article 11 -   Ownership:
-------------  ----------

11.1 Ownership. Ownership of patents based on discoveries made during the term
of this Agreement shall be based on inventorship. Inventorship of all inventions
will be determined in accordance with United States patent law. Any and all
patents and patent applications containing claims covering inventions made
during the term of this Agreement solely by Licensor's employees or any other
Person(s) under the direction and control of Licensor shall be the property of
and will be solely owned by Licensor. Any and all patents and patent
applications containing claims covering inventions made during the term of this
Agreement solely by Licensee's employees or any other Person(s) under the
direction and control of Licensee shall be the property of and will be solely
owned by Licensee. Any and all patents and patent applications ("Joint Patent
Rights") containing claims covering inventions made during the term of this
Agreement by one or more employees or Person(s) under the direction and control
of Licensor and by one or more employees or Person(s) under the direction and
control of Licensee will be the property of, and will be owned by, Licensor and
Licensee jointly. The Parties shall execute a cross-license whereby Licensor
grants Licensee an exclusive license under the Joint Patent Rights in the
Licensed Field and Licensee grants Licensor an exclusive license for all
applications outside the Licensed Field. Each such license shall bear royalties
at the rate of [*] of net sales with respect to any product covered by claim of
any Joint Patent Right.

Article 12 -   Filing and Maintenance of Patents:
-------------  ----------------------------------

12.1  Filing and Maintenance.  Licensor shall file, prosecute, and maintain all
Licensed Patents in the Licensed Territory at its own expense and shall keep
Licensee fully and timely informed with respect to the course and conduct of
patent application and prosecution matters.  Licensor shall keep Licensee fully
and timely informed with respect to the course and conduct of all patent
application and prosecution matters handled by UKRF.  If Licensor or UKRF elects
not to pursue patent protection in any country within the Licensed Territory,
Licensor shall notify Licensee and Licensee shall have the right, but not the
obligation, to file, prosecute and maintain such patent(s) in such country at
its own expense, and, with respect to all such patents owned by Licensor,
Licensor shall transfer title to Licensee for each such patent application or
patent.  With respect to Joint

                                       19
<PAGE>

Patents, Licensee and Licensor shall, prior to filing any patent application,
review the invention and determine which Party should be responsible for
coordinating the filing. All filings, prosecution and maintenance of Joint
Patents shall be subject to the prior review and approval of both Parties. All
costs of filing, prosecuting and maintaining a Joint Patent shall be shared
equally by the Parties.

12.2  Compulsory Licenses.  If Licensee is compelled by applicable law to issue
sublicenses to Sublicensees for Licensed Products, Licensee shall inform
Licensor and the Parties shall renegotiate the terms of this Agreement covering
royalties and other payments required hereunder, but only with respect to the
country(ies) where such compulsory licenses have been ordered so that the
renegotiated royalty and payment terms shall be no less favorable to Licensee
than those granted to any third party under any such compulsory license.

Article 13 -   Enforcement of Intellectual Property Rights:
-------------  --------------------------------------------

13.1  Enforcement.  Each Party shall inform the other promptly in writing of any
alleged infringement of a Licensed Patent or Licensed Know-how in the Licensed
Field by a third party (an "Infringer"), including all details then available.
With respect to any infringement of any Licensed Patent or Licensed Know-how in
the Licensed Field, Licensor shall have the first right, but shall not be
obligated, to take any legal action at its own expense against the infringer.
If Licensor has not taken legal action or been successful in obtaining cessation
of the infringement within ninety (90) days (except that such 90-day period
shall be reduced to thirty (30) days after becoming aware of such infringement
if Licensee notifies Licensor that Licensee would like to move for injunctive
relief) or if Licensor elects not to prosecute or to continue prosecuting any
legal action against an infringer within such 30-day or 90-day period, Licensee
shall have the right, but shall not be obligated, to take any legal action at
its own expense against the infringer.  If neither Licensor nor Licensee
commences actions or proceedings against Infringers or unauthorized users of any
such Licensed Patent or Licensed Know-how that has been licensed from UKRF
within the time periods specified above, UKRF, at UKRF's expense, shall have the
right to initiate and pursue such action and receive all resulting benefits.  If
Licensee initiates or continues any action against an Infringer, Licensee shall
have the right to name Licensor as a party in such action.

If either Party shall initiate or carry on legal proceedings against any
Infringer as contemplated hereby, the other Party shall fully cooperate with and
supply all assistance reasonably required by the Party initiating or carrying on
such proceedings.  The Party which initiates any such proceedings shall have
sole control of such proceedings and shall bear the reasonable expenses
(excluding all legal fees) incurred by the other Party in providing such
assistance and cooperation as is requested pursuant to this paragraph.  The
Party initiating or carrying out such proceedings shall consult with and keep
the other Party informed of the progress of such proceedings, including, without
limitation, furnishing copies of communications, pleadings and other documents
and keeping the other Party informed of settlement efforts and developments, and
such other Party shall be entitled to participate with counsel in such
proceedings but at its own expense.  If Licensee initiates and carries on such
proceedings, it may offset its reasonable expenses, including reasonable legal
expenses, incurred in regard thereto against any payments

                                       20
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

owed to Licensor under Article 3 of this Agreement, provided, however, that
after the initiation of any such proceedings, no such payment shall be reduced
by more than 50% by any such offset, although Licensee may carry offsets forward
to set off against future payments due under Article 3 on the same 50% per
payment basis.

Any award paid by any third party as a result of such proceedings (whether by
way of settlement or otherwise) shall be first applied to reimbursement of the
unreimbursed legal fees and expenses incurred by the Parties, pro rata in
proportion to such fees and expenses, then to the payment to Licensor of any
amounts that were offset against royalty or other payments as provided above,
and then the remainder shall be divided by the Parties pro rata in proportion to
the fees and expenses incurred by the Parties in connection with any action
against the Infringer provided, however, that each Party (regardless of the
extent, if any, to which such Party participates in such action) shall be
entitled, after reimbursement of any applicable expenses and royalties as
provided herein, to no less than [*] of any net recovery.

No settlement, consent judgment or other voluntary final disposition of a suit
with respect to infringement of any Licensed Patent may be entered into without
the joint consent of Licensor and Licensee, which consent shall not be withheld
unreasonably.

Article 14 -   Term: Termination:
-------------  ------------------

14.1  Expiration of Royalty Obligations.  Subject to the following sentence,
Licensee's obligation to pay a running royalty shall terminate on a Licensed
Product-by-Licensed Product and country-by-country basis, upon the date that is
the later of (i) the last to expire of any issued and enforceable Licensed
Patent which covers the actual manufacture, use, sale or importing of such
Licensed Product in such country, or (ii) ten (10) years from the last new FDA
or other comparable approval with respect to an Indication for the applicable
Licensed Product in the applicable country but in no event more than twenty (20)
years from the date of the first FDA or comparable approval for the first
Indication with respect to such Licensed Product in such country.  At the end of
each such term, and on a country by country basis, Licensee shall have an
irrevocable, fully paid up license under the Licensed Patents and Licensed Know-
how in the Licensed Field to make, have made, use, offer to sell, sell, and
import such Licensed Product in such country.

14.2  Term.  This Agreement shall continue for so long as Licensee has any right
to exercise any of its rights with respect to any Licensed Patent or Licensed
Know-how in the Licensed Territory, unless earlier terminated by Licensor or
Licensee as provided herein.

14.3  Termination by Licensor.  Licensor shall have the right to terminate this
Agreement and the License granted hereunder upon the happening of any of the
following events:

     14.3.1 Failure to Pay. Licensee fails to pay or cause to be paid any
     royalty or other payment which has become due to Licensor under this
     Agreement, within thirty (30) days after receiving a written request from
     Licensor to make such

                                       21
<PAGE>

     payment or to cause such payment to be made; provided, however, that if any
     payment is disputed in good faith by Licensee, Licensee may delay paying
     the disputed portion of such payment by invoking the dispute resolution
     procedure set forth in Article 26. If the dispute resolution procedure
     results in a final determination that Licensee owed some or all of such
     disputed amount, Licensee shall pay such owed amount within ten (10) days
     of such determination, together with interest thereon from the date such
     amount was due at one and one-half (1.5) times the prime rate in effect at
     such determination as announced by Chase Manhattan Bank, N.A.;

     14.3.2 Breach. Licensee has materially breached or defaulted under any
     other provision of this Agreement and has not cured such breach or default
     within ninety (90) days after written notice from Licensor to Licensee
     specifying the nature of such breach or default in reasonable detail;
     provided, however, that if Licensee has invoked the dispute resolution
     procedure set forth in Article 26, this Agreement may not be terminated
     until such dispute resolution procedure has been completed; or

     14.3.3 Bankruptcy. The filing of a bankruptcy petition by or against the
     Licensee, the entry by Licensee into a trust deed, creditor's arrangement
     or comparable proceeding, or the appointment of a receiver for
     substantially all of the assets or business of Licensee that is not
     dismissed within ninety (90) days from the date of such filing or
     appointment.

14.4  Termination by Licensee.
      -----------------------

     14.4.1 Indication Termination. Where the development of a Licensed Product
     in an Indication is provided for in the Research and Development Plan and
     where the development of such Licensed Product in such Indication by
     Licensor is funded by Licensee under the Budget, Licensee may terminate
     this Agreement with respect to such Licensed Product in such Indication
     upon ninety (90) days' written notice to Licensor if the Steering Committee
     determines (on the basis of regulatory action or otherwise) that such
     Licensed Product in such Indication is unsafe, ineffective or no longer
     financially justifiable under any realistic market scenario due to material
     adverse changes in the market or potential market for such Licensed Product
     in such Indication. If Licensee wishes to exercise its right to terminate
     this Agreement with respect to a Licensed Product as provided in this
     Section, it must do so within ninety (90) days of Licensee becoming
     eligible to do so. Upon any such termination by Licensee, such Licensed
     Product for such Indication shall be excluded from the license granted to
     Licensee hereunder. In the event of any termination pursuant to this
     Section 14.4.1, Licensee shall remain liable for all Milestone Payments
     with respect to such Licensed Product and all payments due under the Budget
     with respect to such Licensed Product in such Indication falling due before
     the end of such 90-day period. The Parties acknowledge that Licensee may
     choose not to exercise its termination rights under this Section with
     respect to any situation giving rise to such termination rights, in which
     case there shall be no such termination.

                                       22
<PAGE>

     14.4.2 Without Cause. Licensee may terminate this Agreement at any time
     without cause on ninety (90) days' written notice to Licensor. Upon such
     termination, Licensee shall remain liable for all Milestone Payments and
     payments falling due under the Budget before the end of the first ninety
     (90) days after Licensor's receipt of the notice of termination without
     cause. Thereafter, for an additional ninety (90) days (for a total of one
     hundred eighty (180) days after Licensor's receipt of the notice of
     termination), Licensee shall continue to be liable for all payments due
     under the Budget, excluding (i) Milestone Payments and (ii) costs
     associated with any studies, testing or clinical trials (other than any
     such study, test or clinical trial which Licensor was contractually
     obligated to fund prior to receipt of notice of termination) commenced
     during such second ninety (90) day period, regardless of whether the
     commencement of such studies, testing or clinical trials was planned for in
     the Budget.

     14.4.3 Breach. Licensee may terminate this Agreement if Licensor has
     materially breached or defaulted under any provision of this Agreement and
     has not cured such breach or default within ninety (90) days after written
     notice from Licensee to Licensor specifying the nature of such breach or
     default in reasonable detail; provided, however, that if Licensor has
     invoked the dispute resolution procedure set forth in Article 26, this
     Agreement may not be terminated until such dispute resolution procedure has
     been completed.

14.5  Bankruptcy.  All rights and licenses granted under or pursuant to this
Agreement by one Party to the other are, for all purposes of Section 365(n) of
Title XI of the United States Code ("Title XI"), licenses of rights to
"intellectual property" as defined in Title XI.  During the term of this
Agreement each Party shall create and maintain current copies to the extent
practicable of all such intellectual property.  If a bankruptcy proceeding is
commenced by or against one Party under Title XI, the other Party shall be
entitled to a copy of any and all such intellectual property and all embodiments
of such intellectual property, and the same, if not in the possession of such
other Party, shall be promptly delivered to it (a) upon such Party's written
request following the commencement of such bankruptcy proceeding, unless the
Party subject to such bankruptcy proceeding, or its trustee or receiver, elects
within thirty (30) days to continue to perform all of its obligations under this
Agreement, or (b) if not delivered as provided under clause (a) above, upon such
other Party's request following the rejection of this Agreement by or on behalf
of the Party subject to such bankruptcy proceeding.  If Licensee has taken
possession of all applicable embodiments of the intellectual property of
Licensor pursuant to this Section 14.5 and the trustee in bankruptcy of Licensor
does not reject this Agreement, Licensee shall return such embodiments upon
request.  If Licensor seeks or involuntarily is placed under Title XI and the
trustee rejects this Agreement as contemplated under 11 U.S.C. 365(n)(1),
Licensee hereby elects, pursuant to Section 365(n) to retain all rights granted
to Licensee under this Agreement to the extent permitted by law.

14.6  Effect of Termination.  Upon termination of this Agreement for any reason,
nothing herein shall be construed to release either Party from any obligation
that matured prior to the effective date of such termination.  The provisions of
the following Sections

                                       23
<PAGE>

shall survive termination of this Agreement for any reason: Article 1, Sections
2.3, 7.2 (except where termination of this Agreement is pursuant to Section
14.4.3 and only to the extent the Notice Period in 7.2 has not already expired
as of the date of termination of this Agreement), 9.2, 9.3, 9.4, Article 11,
Section 12.1 (with respect to Joint Patents), Article 13, Sections 14.4.2, 14.5,
14.6, 14.7, 15.1.3 and 15.1.4, Sections 15.1.1, 15.1.2 and 15.1.5 (except where
termination of this Agreement is pursuant to Section 14.4.3 or 14.5), Articles
18, 19, 20, 21, 22, 23, 25, 26, 27, 28, 29, 30, 31, 32, 33, 36, 37, 38, and 40;
provided, however, that in the event of any termination by Licensee pursuant to
Section 14.4.1, all provisions of this Agreement shall survive as modified by
the provisions of Section 14.4.1. Licensee and any Sublicensee may, after a
termination, sell all Licensed Products which are in inventory at the time of
termination and complete and sell Licensed Products which Licensee can clearly
demonstrate were in the process of manufacture at the time of such termination,
provided that Licensee shall pay to Licensor any royalties or other payments due
on the sale of such Licensed Products and shall submit reports, in accordance
with this Agreement.

However, notwithstanding the foregoing or anything else in this Agreement, after
termination or expiration of this Agreement for any reason other than pursuant
to Section 14.3, upon written notice to Licensor within thirty (30) days of such
termination, Licensee may continue to exercise the rights granted to Licensee
under the Continuing Provisions of this Agreement as defined below with respect
to those specific B&L Licensed Products and Third Party Licensed Products (if
any) which are in a PCT or later stage of development at the time of such
termination, solely with respect to the form of such B&L Licensed Products and
Third Party Licensed Products in existence at the time of such termination, and
subject to Licensee's compliance with all of its obligations under such
Continuing Provisions, and further provided, however, that the royalty payable
by Licensee with respect to Net Sales of any such B&L Licensed Product or Third
Party Licensed Product shall be the full Applicable Royalty, in effect at the
time of such termination and not subject to reduction by any other provisions of
this Agreement. Except as modified hereby, all provisions of this Agreement
shall survive any such termination for the purposes of determining the rights
and obligations of the Parties pursuant to the provisions of this paragraph. The
Continuing Provisions shall mean all provisions of this Agreement other than
Sections 5.4 through 5.9, and Articles 6, 7, and 8.

14.7  Grant-Back.  Except under the circumstances described in the last sentence
of this Section, solely for the purpose of enabling Licensor and its licensees
to continue the development and commercialization of Licensed Products to which
Licensee no longer has rights, Licensee shall grant to Licensor a fully paid-up,
irrevocable, non-exclusive, worldwide license, with the right to grant
sublicenses under the "Licensee Patents" (as defined below), if any, to make,
have made, use, sell, and import any Licensed Product (other than a B&L Licensed
Product and a Third Party Licensed Product) and for no other purpose.  For
purposes of the foregoing, "Licensee Patent" means any Patent Right existing at
the time of termination of this Agreement which would block Licensor from
practicing any Patent Right included in the Licensed Patents.  Licensor shall
not be entitled to any grant-back rights under this Section if this Agreement is
terminated by Licensee under Section 14.4.3 or 14.5 or if Licensee's obligation
to pay royalties has expired pursuant to Section 14.1.

                                       24
<PAGE>

14.8  Competitor.  If any representative of a competitor of Licensee in the
Licensed Field becomes a member of the Board of Directors of Licensor and has
not ceased to be such a Director (due to removal by Licensor or resignation or
otherwise) within ninety (90) days after notice by Licensee to Licensor,
Licensor shall be in breach of this Agreement, and Licensee may, at its option,
terminate this Agreement under Section 14.4.3 or suspend its payment obligations
until such breach is cured.

Article 15 -   Ownership of Clinical IP:
-------------  -------------------------

15.1  Clinical IP.  Licensor shall use its best efforts to guarantee that
Licensee has complete access to and use of any Clinical IP existing or generated
pursuant to any clinical trial arrangements in effect as of the date of this
Agreement, including, without limitation, seeking to obtain from those parties
described in Exhibit 15.1 agreements substantially in the form of Exhibit 15.1A,
15.1B, or 15.1C, as indicated.  Within ninety (90) days after the date of this
Agreement, Licensor shall have obtained from those Persons specified in Exhibit
15.1 agreements granting to Licensor, and permitting Licensor to grant to
Licensee, access and use rights to the Clinical IP owned and controlled by such
Persons, provided, however, that Licensor's failure to obtain any such agreement
from any- such Person shall be a breach or default by Licensor under this
Agreement only if such failure would reasonably prevent Licensee from
commercializing any material aspect of the technology licensed to Licensee by
Licensor hereunder.  Without limiting the generality of the foregoing, if the
Steering Committee considers it necessary in its reasonable judgment to
reperform (or have reperformed) any preclinical or clinical trials, creation of
preclinical data, or other studies or arrangements that were either ongoing or
completed as of the effective date of this Agreement because Licensee's lack of
access to such information would reasonably prevent Licensee from
commercializing any material aspect of the technology licensed to Licensee
hereunder, Licensee may deduct its out-of-pocket costs for such reperformed work
from up to one-half (1/2) of any royalties otherwise due Licensor, but in no
event shall such deductions exceed one-half of the royalty payment(s) then due,
but Licensee may carry offsets forward to set off against any future royalty
payments.  Notwithstanding the foregoing, Licensee may not deduct the costs for
any study provided for in the initial Budget and the Research and Development
Plan attached to this Agreement.

Except as otherwise determined by the Steering Committee, all clinical trials
other than those clinical trials completed or otherwise ongoing as of the
effective date of this Agreement shall be conducted by Licensor or Licensee or
by Persons contracted with by Licensor or Licensee to perform such clinical
trials who have assigned all ownership rights to any Clinical IP resulting from
such clinical trials to Licensor or Licensee. Licensor shall assign and transfer
to Licensee Licensor's entire right, title and interest in and to all Clinical
IP pursuant to an agreement to such effect in form and substance reasonably
satisfactory to Licensee and shall perform all other actions reasonably
requested by Licensee to effect and confirm such transfer.

     15.1.1 Clinical IP Outside the Licensed Field. Subject to any rights or
     restrictions imposed by applicable third parties, Licensee shall provide
     Licensor full cross-reference rights to all Clinical IP transferred by
     Licensor to Licensee

                                       25
<PAGE>

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETED ASTERISKS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

     made available from third parties to Licensee through Licensor or developed
     by Licensee or its consultants in the course of performing the Research and
     Development Plan, in each case solely for use outside the Licensed Field.

     15.1.2 Clinical IP Upon Termination of Additional R&D Payments. If Licensee
     terminates its obligations to make Additional R&D Payments to Licensor as
     provided in Section 7.1 and 7.2, but does not otherwise terminate this
     Agreement, Licensor shall have the option (exercisable at any time and from
     time to time within two years of such termination) to require Licensee to
     provide Licensor with cross reference rights to any or all Clinical IP
     other than Clinical IP related solely to B&L Licensed Products but only
     under terms and conditions that provide protection for Licensee's
     proprietary and confidential information (including, without limitation,
     information related to manufacturing). Subject to the foregoing protections
     for proprietary and confidential information and subject to any rights or
     restrictions imposed by applicable third parties, Licensee shall also
     provide Licensor with cross reference rights to any or all Clinical IP
     related to Third Party Licensed Products. In consideration of the
     foregoing, Licensor shall pay to Licensee a royalty equal to [*] of Net
     Sales of any product or products developed by Licensor or its Affiliates or
     consultants through use of any such Clinical IP for which Licensor
     exercised the option granted under this paragraph up to a maximum aggregate
     payment equal to Licensee's actual out-of-pocket costs incurred in
     developing the Clinical IP in regard to which Licensor exercises such
     option (which Licensee shall promptly specify, on request, to Licensor).

     15.1.3 Clinical IP Upon Termination Without Cause. If Licensee terminates
     this Agreement without cause pursuant to the provisions of Section 14.4.2,
     Licensor shall have the option (exercisable at any time and from time to
     time within two years of such termination) to require Licensee to provide
     Licensor with cross reference rights to any or all Clinical IP on the same
     terms and subject to the same conditions and obligations as provided in
     Section 15.1.2.

     15.1.4 Clinical IP Upon Termination of a Licensed Product In An Indication.
     If Licensee terminates this Agreement with respect to any Licensed Product
     in any Indication pursuant to Section 14.4.1, Licensor shall have the
     option (exercisable at any time and from time to time within two (2) years
     of such termination of a Licensed Product in an Indication) to require
     Licensee to provide Licensor with cross reference rights to Clinical IP
     related to such Licensed Product in such Indication, on the same terms and
     subject to the same conditions and obligations as provided in Section
     15.1.2.

     15.1.5 Clinical IP Upon Non Exclusivity. If this Agreement becomes non-
     exclusive with respect to the Immusert Product or the ARMD/DME Product in
     any Market, Licensee shall provide Licensor with full cross reference
     rights to all Clinical IP regarding such Immusert or ARMD/DME Product
     relevant to the use of such Licensed Product, in a form and manner
     reasonably acceptable to Licensee and Licensor and at no cost to Licensee,
     and under terms and conditions

                                       26
<PAGE>

     that provide protection for Licensee's proprietary and confidential
     information (including, without limitation, information related to
     manufacturing) while still providing Licensor with access to the
     information which Licensor may require in order to market or license others
     to market the Immusert Product or the ARMD/DME Product in such Market. Each
     Party shall provide the other Party with appropriate irrevocable cross
     reference letters, assignments, and/or other reasonable documentation at
     any time in implementation of the provisions of this Section.

15.2  Transfer of Clinical IP.  Immediately upon execution of this Agreement,
Licensor shall provide Licensee with complete copies of the following (to the
extent Licensor has in its possession or under its control any of the
following):  all clinical data, INDs, additional regulatory filings with FDA,
supplements or amendments thereto, all correspondence with the FDA regarding the
regulatory filings, all minutes of meetings and memoranda of conversations
between Licensor (including Licensor's investigators) and FDA regarding the
regulatory filings.

Within fifteen (15) days of the execution of this Agreement, Licensor shall
execute and deliver a letter to FDA in substantially the form contained in
Exhibit 15.2A transferring ownership of all regulatory filings, if any, filed in
the name of Licensor or its employees listed on Exhibit 15.2B related to
Licensed Products in the Licensed Field to Licensee. Thereafter, during the term
of this Agreement, all regulatory filings with the FDA shall be made in the name
of Licensee or its designated Affiliate except as otherwise agreed by the
Steering Committee and where Licensee would have full access and use rights to
the Clinical IP. If any regulatory filings are made in the name of Licensor,
ownership of the filings, studies and regulatory approvals shall be promptly
(and in any event upon Licensee's request) transferred to Licensee or its
designee.

Article 16 -   University of Kentucky Research Foundation Licenses:
-------------  ----------------------------------------------------

16.1  UKRF Licenses.  Licensor shall maintain the UKRF Licenses in full force
and effect, including (without limitation) making all royalty payments, and
shall not amend or modify the UKRF Licenses without Licensee's prior written
consent, which consent shall not be unreasonably withheld.  Notwithstanding the
foregoing, if UKRF delivers a notice of nonpayment of royalties or of any other
breach of any of the UKRF Licenses to Licensor, Licensor shall immediately
notify Licensee and Licensee shall have the right to make such payments directly
to UKRF or otherwise to cure such breach.  In addition, Licensor shall inform
UKRF of the existence of this Agreement and request UKRF to send a copy of all
default notices to Licensee simultaneously with any notice of default to
Licensor and to permit Licensee to assume, upon receipt of written notice from
Licensee to UKRF, Licensor's obligations under the UKRF License(s) to which such
default notice applies.  Licensee shall have the right to offset the payments
made to UKRF and the cost of curing any default under any of the UKRF Licenses
against future royalties or other payments due Licensor under this Agreement as
provided in Article 23.  If any of the UKRF Licenses are terminated for any
reason, Licensee may enforce its rights and license under this Agreement
directly against UKRF, but only if Licensee agrees in

                                       27
<PAGE>

writing that UKRF may enforce the terms and conditions of this Agreement
directly against Licensee with respect to such terminated UKRF License(s).

Article 17 -   Manufacturing and Supply:
-------------  -------------------------

17.1  Manufacturing.  Unless otherwise agreed by the Steering Committee,
Licensor shall manufacture (or contract for the manufacture of) all Licensed
Products required for Phase I and II clinical trials of each Licensed Product.
Licensee shall manufacture (or contract for the manufacture of) all Licensed
Products required for Phase III clinical trials and commercial sales of each
Licensed Product.  Licensed Products shall be supplied by Licensee to Licensor
for the conduct of Phase III trials at no cost to Licensor.  Licensee shall use
commercially reasonable efforts, which shall not be less than the efforts
expended by Licensee in connection with its other proprietary development
projects, to develop the capacity to manufacture Licensed Products and to assure
that adequate manufacturing capacity for each Licensed Product is available to
generate and meet projected market demand promptly following the achievement of
regulatory approval.  At Licensor's request, Licensee shall provide Licensor
access to appropriate GMP facilities at BLP to permit Licensor to use such
facilities to manufacture Licensed Products for Phase I and II clinical trials.
Licensee shall, in a timely manner, develop appropriate packaging materials for
all Licensed Products and obtain any regulatory approvals required to
manufacture Licensed Products and any related packaging or other materials.

17.2  Supply Agreement.  To accommodate Licensor's need to be supplied with
Licensed Products for Markets in which Licensee's rights to such Licensed
Products have become non-exclusive, and, subject to the execution of a supply
agreement ("Supply Agreement") mutually acceptable to both Parties, Licensor
shall be entitled to purchase product from Licensee or an Affiliate (subject to
capacity constraints), if Licensee or such Affiliate is the manufacturer of such
Product.  The basic agreed terms for the Supply Agreement are set forth in a
term sheet attached hereto as Exhibit 17.2.  If Licensor or an Affiliate is not
the manufacturer of such product, Licensee will use commercially reasonable
efforts to obtain for Licensor the right to purchase reasonable quantities of
product directly from Licensee's manufacturing source at the same cost paid by
Licensee.

Article 18 -   Indemnification:
-------------  ----------------

18.1  Indemnification of Licensee.  Subject to Section 18.2, Licensor shall
indemnify, defend and hold Licensee and each of its officers, directors,
employees, agents and consultants (each a "Licensee Indemnitee") harmless from
and against all third party costs, claims, suits, expenses (including reasonable
attorneys' fees and expenses, whether incurred as a result of a third party
claim or a claim to enforce this provision), and damages (collectively,
"Losses") to the extent arising out of or resulting from (i) any material breach
or failure by Licensor in the performance or non-performance of its obligations
or covenants under this Agreement; (ii) any breach by Licensor of any
representation or warranty hereunder; (iii) the manufacture, marketing,
possession, use, sale or other disposition by Licensor or any of its
sublicensees other than Licensee or any Sublicensee of any Licensed Product
(except where such Losses arise or result from any negligence of Licensee (or
any contract manufacturer of Licensee) in the manufacture of

                                       28
<PAGE>

any such Licensed Product or the failure of Licensee (or any contract
manufacturer of Licensee) to manufacture such Licensed Product in accordance
with GMPs); and (iv) FDA enforcement actions, inspections, product recalls or
market withdrawals relating to a Licensed Product to the extent arising out of
or resulting from Licensor's marketing, possession, use, sale or other
disposition of the Licensed Product or the failure of Licensor (or any contract
manufacturer of Licensor) to manufacture the Licensed Product in accordance with
GMPs or the specifications for the Licensed Product.

18.2  Indemnification of Licensor.  Subject to Section 18.1, Licensee shall
indemnify, defend and hold Licensor and each of its officers, directors,
employees, agents and consultants (each a "Licensor Indemnitee") harmless from
and against all Losses to the extent arising out of or resulting from (i) any
material breach or failure by Licensee in the performance or non-performance of
its obligations or covenants under this Agreement; (ii) any breach by Licensee
of any representation or warranty hereunder; (iii) the manufacture, marketing,
possession, use, sale or other disposition of any Licensed Product by Licensee
or any Sublicensee (except where such Losses arise or result from any negligence
of Licensor (or any contract manufacturer of Licensor) in the manufacture of any
such Licensed Product or the failure of Licensor (or any contract manufacturer
of Licensor) to manufacture the Licensed Product in accordance with GMPs); and
(iv) FDA enforcement actions, inspections, product recalls or market withdrawals
relating to a Licensed Product to the extent arising out of or resulting from
Licensee's marketing, possession, use, sale or other disposition of the Licensed
Product or the failure of Licensee (or any contract manufacturer of Licensee) to
manufacture the Licensed Product in accordance with GMPs or the specifications
for the Licensed Product.

18.3  Limitation of Liability.  Except where a Party commits a willful,
intentional breach of any material provision of this Agreement, no breaching
Party shall be responsible or liable under any provision of this Agreement or
under any contract, theory of negligence or strict liability, or under any other
legal or equitable theory for any resulting indirect, special, incidental,
consequential, punitive, or exemplary damages of the other Party, including
(without limitation) damages such as lost revenues or profits and damage to
goodwill or reputation.  Nothing in this Section shall relieve any Party of any
obligation with respect to any third party claim.

18.4  Procedure for Indemnification.  If an event occurs which a Party believes
requires indemnification ("Indemnification Event"), the Party seeking
indemnification ("Indemnified Party") shall give prompt written notice to the
other Party ("Indemnifying Party") providing reasonable details of the nature of
the event and the basis of the indemnity claim.  The Indemnifying Party shall
then have the right, at its expense and with counsel of its choice, to defend,
contest, or otherwise protect against any such action.  The Indemnified Party
shall also have the right, but not the obligation, to participate at its own
expense in the defense with counsel of its choice.  The Indemnified Party shall
cooperate as requested by the Indemnifying Party to assist it in defending or
contesting any such action.  If the Indemnified Party fails to promptly notify
the Indemnified Party of the occurrence of an Indemnification Event, to the
extent, but only to the extent, that such failure results in a material adverse
effect on the Indemnifying Party, the Indemnified Party shall not be entitled to
indemnification with respect to such

                                       29
<PAGE>

Indemnification Event. If the Indemnifying Party fails within thirty (30) days
after receipt of such notice: (a) to notify the Indemnified Party of its intent
to defend, or (b) to defend, contest, or otherwise protect against such suit,
action, investigation, claim or proceeding, or fails to diligently continue to
provide such defense after undertaking to do so, the Indemnified Party shall
have the right, upon ten (10) days' prior written notice to the Indemnifying
Party, to defend, settle and satisfy any such suit, action, claim, investigation
or proceeding and recover the costs of the same from the Indemnifying Party.

18.5  Insurance.  To the extent required by the UKRF Licenses, Licensee will
maintain product liability insurance, with an endorsement naming UKRF, the
University of Kentucky, its Board of Trustees, agents, officers, and employees
as additional insureds covering liabilities for the production, manufacture
and/or sale of the Licensed Product by Licensee or any Sublicensee.  The policy
of insurance shall contain a provision of non-cancellation except upon the
provision of thirty (30) days' notice to the University of Kentucky.  Policy
limits shall be not less than $1,000,000 per occurrence.

Article 19 -   Trademarks:
-------------  -----------

19.1  Trademarks.  Licensee shall own the logos, trade names, copyrights,
trademarks, and other commercial symbols ("Marks") developed or used in
connection with any and all Licensed Products.  During and after the term of
this Agreement, Licensor shall not directly or indirectly contest the ownership,
validity or originality of the Marks for the Licensed Products, the B&L Licensed
Products, the Third Party Licensed Products, and the goodwill represented by any
of the foregoing Marks.  Licensor will not use any name or other symbol
confusingly similar to or, in the reasonable judgment of Licensee, suggestive of
any of the foregoing Marks.  If Licensor learns of any unauthorized use of any
such Marks it shall promptly inform Licensee in writing.

Article 20 -   Noncompetition:
-------------  ---------------

20.1  Noncompetition.  Except to the extent that the license granted to Licensee
hereunder becomes non-exclusive with respect to a Licensed Product, Licensor
shall not, alone or with others, during the term of this Agreement and for a
period of three (3) years following termination of this Agreement pursuant to
Section 14.1, 14.4.3, or 14.5, introduce into any Market a product which
immediately prior to such termination was being marketed in such Market by
Licensee as a Licensed Product.

Article 21 -   Representations and Warranties
-------------  ------------------------------
21.1  Representations and Warranties of Both Parties.  Each Party hereby
represents and warrants to the other Party that:

     (i)    It is a corporation duly organized, validly existing and in good
            standing under the laws of the jurisdiction of its incorporation;

     (ii)   It has all requisite corporate power and authority and is free to
            enter into this Agreement and to perform its obligations hereunder;

                                       30
<PAGE>

     (iii)  It has taken all corporate action to authorize the execution and
            delivery of this Agreement, any other documents executed and
            delivered in connection herewith and the performance of its
            obligations hereunder and thereunder, all of which shall be valid,
            binding and enforceable in accordance with its or their terms;

     (iv)   The execution, delivery, and performance of this Agreement (a) will
            not violate or require it to obtain any consent or approval, to make
            any filing or to provide any notice, or (b) will not conflict with
            or result in a breach of any of any agreement or other instrument to
            which it is a party or by which it is bound; and

     (v)    Except as described in Exhibit 21.1(v), there is no litigation,
            proceeding, or governmental investigation to which it is a party
            pending or threatened against it, or, to its knowledge, against any
            third party, as to which there is a likelihood of an outcome(s) that
            would, individually or in the aggregate, reasonably be expected to
            delay or otherwise materially impair its ability to perform its
            obligations contemplated by this Agreement.

21.2  Representations and Warranties of Licensor.  Licensor hereby represents
      ------------------------------------------
and warrants to Licensee that:

      (i)   The UKRF Licenses set forth in Exhibit 1.34 are the only UKRF
            Licenses, all of which are in full force and effect and have not
            been amended or otherwise modified; Licensor has complied and will
            comply with all provisions of the UKRF Licenses; Licensee shall owe
            no royalty or other payment to UKRF or any affiliate of UKRF under
            the UKRF Licenses and there does not exist any event of default with
            respect to Licensor under any of the UKRF Licenses which, after
            notice or lapse of time or both, would constitute an event of
            default with respect to Licensor;

      (ii)  Licensor has all rights and consents necessary to grant the rights
            and licenses granted to Licensee under this Agreement;

      (iii) To Licensor's knowledge, all of the patents constituting Licensed
            Patents in existence on the day hereof are valid and enforceable and
            have been maintained to date ;

      (iv)  Licensor has no reason to believe that any of the pending patent
            applications constituting part of the Licensed Patents as of the
            date of this Agreement will not in due course issue as valid and
            enforceable patents, and, as of the date of this Agreement, set
            forth on Exhibit 21.2(iv) is a list of all Inventions, associated
            inventors, and related patent applications, if any, that Licensor
            expects to be filed by Licensor or a third party within ninety (90)
            days of the date of this Agreement in connection with the Patent
            Rights;

                                       31
<PAGE>

       (v)    Except as described in Exhibit 21.2(v), Licensor warrants that it
              owns the entire right, title, interest in and to the Licensed
              Patents and that the entire interest is not encumbered in any
              manner, that Licensor has the right to disclose the Licensed Know
              How, and that Licensor is not a party to any agreement with any
              third party which is in conflict with the rights granted to
              Licensee pursuant to this Agreement, including, without
              limitation, with respect to the Licensed Patents and the Licensed
              Know-how;

       (vi)   Licensor has provided Licensee with copies of all agreements or
              other instruments evidencing government grants and third party
              funding it has received up to the date of this Agreement; and, to
              Licensor's knowledge, no inventions were conceived or first
              reduced to practice during the course of research conducted in
              whole or in part with government funding or during the course of
              research conducted by outside clinical investigators;

       (vii)  Licensor has provided Licensee with copies of all opinions of
              counsel, clearances, studies, licenses, and agreements relating to
              Licensed Patents, Licensed Know-how, and Licensed Products,
              including, without limitation, those permitting Licensor to make,
              use, sell, and otherwise dispose of Licensed Products and to grant
              sublicenses;

       (viii) Except as described in Exhibit 21.2(vii), Licensor shall have full
              and unrestricted access and use rights to the currently existing
              Clinical IP; and

       (ix)   The Persons who are listed on Exhibit 21.2(ix) are all of the
              officers, employees, and consultants of Licensor. Each of such
              Persons has signed a confidentiality and invention disclosure and
              assignment agreement (a) which requires such individual to observe
              confidentiality restrictions at least as strict as those between
              the Parties, and (b) which results in Licensor having unrestricted
              ownership of any intellectual property created by such individual
              during his or her employment or engagement by Licensor, including
              (without limitation) all intellectual property created or
              developed by such individual before the date of this Agreement
              during such employment or engagement.

As used in this Agreement, (i) "to Licensor's knowledge" (or any equivalent
term) means to the best actual knowledge, as of the date of this Agreement, of
Licensor and its executive officers after diligent investigation, without
commissioning special searches or studies, and inquiry of Licensor's employees
(including officers) and of any principal investigators) or researchers) engaged
by Licensor, and (ii) "to Licensee's knowledge" (or any equivalent term) means
to the best actual knowledge, as of the date of this Agreement, of Licensee and
its executive officers after diligent investigation, without commissioning
special searches or studies.

Article 22 -   Express Warranty of Non-Infringement:
-------------  -------------------------------------

22.1  Non-Infringement Warranty.  Licensor represents and warrants that, to its
knowledge, the CDS Licensed Products do not infringe or otherwise violate any

                                       32
<PAGE>

intellectual property right of any third party. Licensor also represents and
warrants that it has received no oral or written communication that a Licensed
Product infringes or otherwise violates the intellectual property right of a
third party.

22.2  Warranty Disclaimer.  Except as otherwise expressly set forth in this
Agreement, Licensor makes no express or implied warranty including, without
limitation, any implied warranty of merchantability or any), implied warranty of
fitness for a particular purpose with respect to any of the Licensed Patents or
Licensed Know-how or any Licensed Product and hereby disclaims the same.

22.3  Operations in Compliance with Law.  Up to the date of this Agreement, each
Party has complied, and in exercising the rights granted to each Party by this
Agreement, each Party shall comply, in all material respects with all applicable
laws, including, without limitation, the requirements of 35 U.S.C.  (S)200 et
seq.  and all regulations promulgated thereunder, as amended, and any similar or
successor statutory regulations (collectively, the "Federal Patent Policy").  To
the extent that any Licensed Patent claims an invention subject to Federal
Patent Policy, the license granted to Licensee hereunder with respect to such
Licensed Patent may be subject to any royalty-free, non-exclusive license
granted to the United States Government pursuant to 35 U.S.C.  (S)204(c)(4).

Article 23 -   Infringement of Third Party's Patents:
-------------  --------------------------------------

23.1  Infringement of Third Party Patents.  Each Party shall promptly send the
other Party a copy of any notice or communication from a third party alleging
any infringement or other violation of such third party's intellectual property
rights (`Notice").  Licensor shall have the first right, but shall not be
obligated, to respond to the Notice.  If Licensor does not elect to respond,
Licensor shall promptly inform Licensee and permit it to respond to the Notice.
Licensee shall have the right, but shall not be obligated, to take any legal
action at its own expense in response to the Notice.  Licensee shall have the
right to name Licensor as a party in connection with any action in response to
the Notice.

Each Party shall cooperate fully with the other Party in any action resulting
from or in connection with the Notice.  Unless the Parties are separately
defending themselves, the Party defending any such proceedings shall have sole
control of such proceedings and shall bear the reasonable expenses (excluding
all legal fees) incurred by the other Party in providing such assistance and
cooperation as is requested pursuant to this paragraph.  The Party defending
such proceedings shall consult with and keep the other Party informed of the
progress of such proceedings, including, without limitation, furnishing copies
of communications, pleadings and other documents and keeping the other Party
informed of settlement efforts and developments, and such other Party shall be
entitled to participate with counsel in such proceedings but at its own expense.
If Licensee defends such proceedings, it may offset its reasonable expenses,
including reasonable legal expenses, incurred in regard thereto against any
payments owed to Licensor under Article 3 of this Agreement, provided, however,
that no such payment shall be reduced by more than fifty percent (50%) by any
such offset, although Licensee may carry offsets forward to set off against
future payments due under Article 3 on the same fifty percent (50%) per payment
basis.  Licensee shall continue to perform its reporting obligations under
Article 9 and otherwise continue to perform its obligations hereunder.

                                       33
<PAGE>

Neither Party shall settle any infringement, misappropriation, or other claim
subject to this Article 23 without the consent of the other Party, which consent
shall not be unreasonably withheld, if it would adversely affect Licensee's
rights hereunder.

If any Invention claimed in a Licensed Patent or any Licensed Know-how is
covered by an issued patent or other intellectual property right held by one or
more third parties and it becomes necessary for Licensee to obtain a license
from such third party or parties under such patent, and/or other intellectual
property right and accordingly to pay royalties to such third party(ies) with
respect to any Net Sale of any Licensed Product, then Licensee may reduce any
royalty otherwise due Licensor by one-half (1/2) of the amount of royalty
payment due to such third party, but in no event to less than one-half (1/2) of
the royalty which may then be due to Licensor.  In addition, if Licensee is
required to pay any an upfront or similar fee to any third party(ies), Licensor
shall share in the payment of any such consideration which involves more than a
running royalty as follows.  If, for example, Licensee is required to pay an
upfront fee of $1 Million to a third party, the royalty payments then due
Licensor shall be reduced by half until one-half of the upfront fee ($500,000)
has been recouped by Licensee.

If Licensor is required to pay any damages (i.e., something other than
prospective royalties and an upfront or similar fee) to the third party,
Licensor shall be responsible for the payment of any such damages to the third
party and shall be permitted to recoup one-half (1/2) of such payment from
Licensor as follows.  If, for example, Licensee is required to pay damages of S1
Million to the third party, Licensor's royalty payments otherwise due under this
Agreement shall be reduced by half until fifty percent (50%) of the damages
($500,000) have been recouped by Licensee.

Except as set forth below, any reduction of royalties due Licensor as a result
of a recoupment of running royalties, upfront fees, and damages in the aggregate
arising out of a third party claim of infringement or violation of intellectual
property rights under this Section shall not reduce any single royalty payment
otherwise due Licensor hereunder by more than fifty percent (50%), but Licensee
may carry unrecovered amount forward to be set off against future payments of
royalties due on the same fifty percent (50%) per payment basis.

In the event of any alleged claim of infringement, breach of contract, or other
potential cause of action by UKRF relating to the UKRF Licenses, Licensor shall
take any action which Licensee may reasonably request to maintain Licensee's
rights to any intellectual property rights licensed to Licensor under the UKRF
Licenses (the "UKRF Rights"), including, without limitation, making any royalty
or other payments ("Payment(s)") that Licensee reasonably determines, on the
basis of a written opinion of reputable outside patent counsel (which, together
with any other relevant information, is disclosed by Licensee to Licensor at the
time of such determination), are necessary to maintain such rights or to avoid
termination or infringement of such rights; provided, however, that nothing in
this paragraph shall prevent Licensor from disputing in good faith any such
claim of infringement or other violation.  Furthermore, Licensor shall provide
Licensee with a copy of any notice of default or breach received by Licensor
which relates in any way to the UKRF Rights within five (5) business days of
receipt of such notice.  If Licensor fails to make any Payment before any
applicable cure period has expired, Licensee may make such Payment in Licensor's
name and on Licensor's behalf before such cure period expires, and

                                       34
<PAGE>

Licensee may fully recover any Payment made by Licensee under this paragraph at
the applicable rate described in the next paragraph. Licensor's remedy for
recovering Payments made by Licensee to any third party pursuant to this
paragraph shall be limited to recovery from such third party and not Licensee.

Except as set forth below, where Licensee seeks recoupment for Payment(s) made
to UKRF as a result of Licensor's failure to make any Payment to UKRF, Licensee
shall be permitted to recoup the full amount of such Payment against one hundred
percent of the royalty then due to Licensor as follows ("100% Recoupment Rate"):
Licensee may reduce any royalty payment otherwise due to Licensor hereunder by
the full amount of such royalty payment less any royalties payable by Licensor
to UKRF ("Net Royalty Amount").  Licensee may carry any unrecovered Payment(s)
forward to be set off against future payments of royalties due on the same Net
Royalty Amount basis until the full amount of the Payment made to UKRF by
Licensee is recovered from Licensor.  The 100% Recoupment Rate shall not apply
where Licensee seeks recoupment for Payment(s) made to UKRF where Licensor's
decision not to make any Payment to UKRF (i) was made on the basis of a written
opinion of reputable outside patent counsel; (ii) the opinion and any other
relevant information was fully disclosed to Licensee within a reasonable time
prior to Licensor's decision not to pay; and (iii) where, following such
disclosure, Licensee failed to require Licensor to make the Payment in
accordance with the provisions of the previous paragraph on the basis of the
written opinion of counsel as provided therein.  In such case Licensee shall be
permitted to recoup the full amount of Licensee's Payment to UKRF by reducing
any royalty payment otherwise due to Licensor hereunder by fifty percent (50%),
and Licensee may carry any unrecovered Payment(s) forward to be set off against
future payments of royalties due on the same fifty percent (50%) per payment
basis until the full amount of the Payment made to UKRF is recovered from
Licensor ("50% Recoupment Rate").

Notwithstanding anything in this Section 23, however, if the third party
alleging infringement or other violation of intellectual property rights is one
of the investigators (or his associated institution) set forth on Exhibit 15.1,
Licensor shall be responsible for all costs and expenses (including, without
limitation, royalties and damages) without regard to any limitations in this
Section.

Article 24 -   Force Majeure:
-------------  --------------

24.1  Force Majeure.  Neither Party shall be liable for any failure to perform
arising out of causes beyond the control and without the fault or negligence of
such Party.  Such causes include, but are not limited to, acts of God; acts of
the public enemy; natural disasters such as fire or flood or unusually severe
weather; quarantine restrictions; strikes; and freight embargoes.

Article 25 -   Choice of Law/Forum:
-------------  --------------------

25.1  Choice of Law/Forum.  Any legal or other action hereunder shall be brought
in the State and federal courts nearest the principal place of business of the
defendant in any such action, and this Agreement shall be construed and
interpreted and its performance shall be governed by the substantive laws of the
State where such courts are located, i.e., New York, if Licensee is the
defendant, and Massachusetts, if Licensor is the defendant,

                                       35
<PAGE>

without regard to the state's conflict of laws principles. The Parties consent
to the exclusive personal jurisdiction and venue of such courts in the event of
such action.

Article 26 -   Dispute Resolution:
-------------  -------------------

26.1  Disputes.  If there is any dispute arising out of or relating to this
Agreement or a Party's performance or failure to perform hereunder, including
but not limited to disputes of the Steering Committee, such dispute shall, at
the written request of either Party be submitted to the top executive officer of
each Party, or another executive officer of a Party designated by the top
executive officer as his or her representative for such purpose.  The initial
Representatives are the General Manager, North American Pharmaceuticals, for
Licensee, and the President of Licensor.  The Representatives shall meet as soon
as reasonably practicable to consider the matter and each shall each use
reasonable commercial efforts to effect a resolution.  If the Representatives
are able to resolve the dispute, the resolution shall be set forth in a written
instrument signed by each of them.

If the Representatives are not able to resolve the dispute within thirty (30)
days of their first meeting or within such extended period they agree upon, they
shall proceed to non-binding arbitration by a skilled mediator familiar with the
commercial and manufacturing processes of the pharmaceutical industry and
pursuant to the rules of an organization specializing in alternatives to
disputes, such as the CPR Institute for Dispute Resolution, End Dispute, or the
American Arbitration Association.  If the Parties cannot agree upon a single
mediator within the next 30 days, they shall each select a mediator and the two
selected shall select the sole mediator.  If a Party does not select a mediator,
the mediator selected by the other Party shall be the sole mediator.  The
selected mediator shall use his best efforts to make a nonbinding decision on
the merits of the case within sixty (60) days, and the Parties shall use their
best reasonable commercial efforts to cooperate with the mediator.  The mediator
need not give reasons for his decision.

If the Parties are not able to resolve their dispute through mediation, such
dispute may, if they agree, be submitted to binding arbitration pursuant to the
expedited procedures and in accordance with the Patent Licensing Rules of the
American Arbitration Association.  The arbitrator shall be mutually selected by
the Parties or, if they cannot agree, each Party shall designate one arbitrator
to represent it in the selection process and the two arbitrators shall appoint a
third arbitrator who shall arbitrate such dispute or difference.  Such selection
process shall be completed within sixty (60) days from the end of the period
during which Representatives have responsibility for attempting to resolve the
dispute.  The disputed matter shall be arbitrated at such location as the
Parties shall mutually designate or, if they are not able to agree on such
location, at a location selected by the arbitrator.  The selected arbitrator
shall, if reasonably possible, be one who is familiar with the commercial and
manufacturing practices of the pharmaceutical industry.

The arbitrator's award shall be final and binding on the Parties and enforceable
by either Party in any court of competent jurisdiction.  The fees and expenses
of the arbitrator shall be shared equally by the Parties.  Notwithstanding
anything to the contrary, nothing in this Section shall prevent either Party
from seeking immediate injunctive relief (or any other provisional remedy) from
any court having jurisdiction over the Parties and the subject matter of the
dispute as

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<PAGE>

necessary to protect either Party's name, proprietary information, trade
secrets, know-how or any other proprietary rights.

Article 27 -   Notices:
-------------  --------

27.1  Notices.  Any notice, request, instruction or other communication required
or permitted to be given under this Agreement shall be in writing and shall be
given by sending such notice properly addressed to the other Party's address
shown below (or any other address as either Party may indicate by notice in
writing to the other from time to time as required by this Article): (i) by hand
or by prepaid registered or certified mail, return receipt requested, (ii) by a
nationally recognized overnight courier service, or (iii) via facsimile
(provided such facsimile is sent by a machine which acknowledges receipt of the
transmission) at the following addresses:

If to Licensor:

     Control Delivery Systems
     86 Rosedale Road
     Watertown, MA 02172-2234
     Attn: President
     Facsimile Number: 617-926-2313

With a copy to:

     Ropes & Gray
     One International Place
     Boston, MA 02110
     Attn: Geoffrey B.  Davis and Mary E. Weber
     Facsimile Number: 617-951-7050

If to Licensee:

     Bausch & Lomb Pharmaceuticals, Inc.
     8500 Hidden River Parkway
     Tampa, Florida 33637
     Attn: General Manager, North American Pharmaceuticals
     Facsimile Number: (813) 977-0138

With a copy to:

     Bausch & Lomb Incorporated
     One Bausch & Lomb Place
     Rochester, New York 14604
     Attn: Chief Patent Counsel
     Facsimile Number: (716) 338-8706

                                       37
<PAGE>

Any notice, if mailed properly addressed, postage prepaid, shall be deemed made
(i) three (3) days after the date of mailing as indicated on the certified or
registered mail receipt, (ii) on the next business day if sent by overnight
courier service, or (iii) on the date of delivery if hand delivered or the date
of transmission if sent by facsimile transmission.

Article 28 -   Merger Clause:
-------------  --------------

28.1  Merger.  This Agreement contains the entire understanding between the
Parties and supersedes all proposals, oral and written, all negotiations,
conversations or discussions between or among the Parties relating to the
subject matter of this Agreement, except that this Agreement shall not change or
supersede the rights and obligations of the Parties under the License and
Development Agreement between Licensor and Chiron IntraOptics, Inc., dated
December 31, 1992, pursuant to which Licensee assumed Chiron IntraOptics, Inc.'s
rights and obligations by acquiring Chiron Vision Corporation.

Article 29 -   Integration Clause:
-------------  -------------------

29.1  Integration.  No amendment or modification to this Agreement shall be
valid or binding upon the Parties unless made in writing and executed by
authorized representatives of both Parties.

Article 30 -   Severability Clause:
-------------  --------------------

30.1  Severability.  Any terms or provision of this Agreement which is found to
be invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity of enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.

Article 31 -   No Waiver:
-------------  ----------

31.1  No Waiver.  The failure of either Party to terminate, seek redress for a
breach of, or to insist on strict performance of any term, covenant, condition,
or provision contained in this Agreement shall not act as a waiver of rights or
of the right to require future compliance and the term, covenant or provision in
question shall remain in full force and effect.

Article 32 -   General Liability Release for Employees:
-------------  ----------------------------------------

32.1  General Liability Release.  Licensor and Licensee shall each assume full
risk of damage or injury to its own properties, representatives and employees
caused by any act or failure to act, including negligence, of the employees or
representatives of the other during the performance of this Agreement.  Each
Party hereby releases the other from any and all liability for loss or damage so
caused to its own properties, and, pursuant to Article 18, each Party shall
indemnify and hold harmless the other against all liability so caused on account
of personal injury to its respective representatives and employees.

                                       38
<PAGE>

Article 33 -   Transferability of Rights and Obligations:
-------------  ------------------------------------------

33.1  Binding Agreement.  This License and Agreement shall inure to the benefit
of and be binding upon the successors, assigns, or other legal representatives
of the Parties.  Notwithstanding the foregoing, neither Party may assign,
delegate, or subcontract its right and obligations hereunder without the prior
written consent of the other Party, which shall not be unreasonably withheld,
except that (i) no consent shall be necessary in the case of any transfer by
Licensee of substantially all of the assets or stock of Licensee's proprietary
(branded and/or generic) ophthalmic pharmaceutical business, (ii) no consent
shall be necessary in the case of any Sublicense, and (iii) no consent shall be
necessary in the case of any transfer by Licensor of substantially all of the
assets or stock of Licensor's ophthalmics business, provided such transfer is
not directly or indirectly to a competitor of Licensee.

Article 34 -   Patent Marking:
-------------  ---------------

34.1  Patent Marking.  Licensee shall mark all Licensed Products sold or
otherwise disposed of by it in the United States under the license granted in
this Agreement with the word "Patent" and the number of the Licensed Patent.
All License Products shipped or sold in other countries shall be marked in such
a manner as to conform with the patent laws and practice of the country to which
such products are shipped and in which such products are sold.

Article 35 -   Publicity:
-------------  ----------

35.1  Publicity.  Unless (i) otherwise expressly provided in this Agreement,
(ii) required by applicable law or any listing agreement with, or the rules and
regulations of, any applicable securities exchange or the National Association
of Securities Dealers, (iii) necessary to secure any required consents as to
which the other Party has been advised, or (iv) consented to in writing by the
furnishing Party, any confidential information or documents furnished in
connection herewith shall be kept strictly confidential by the receiving Party
and its Affiliates, officers, directors, employees and agents.  Prior to any
disclosure pursuant to the preceding sentence, the Party intending to make such
disclosure shall consult with the other Party regarding the nature and extent of
the disclosure and shall cooperate with the other Party to obtain (x)
confidential treatment of the terms and conditions of this Agreement under the
Securities Act of 1933 or the Securities Exchange Act of 1934 or other
applicable law or regulation in substance reasonably satisfactory to the
furnishing Party, (y) a protective order or other judicial or quasi-judicial
protection for the protection of the confidentiality of this Agreement and its
terms and conditions, and (z) such other protections as the fumishing Party may
reasonably require.

Article 36 -   Independent Contractors:
-------------  ------------------------

36.1  Independent Contractors.  Licensor and Licensee are not partners, joint
venturers or agents of one another and shall at all times act as independent
contractors without the right or authority to bind each other with respect to
any agreement, representation, or

                                       39
<PAGE>

warranty made with or to any third party. Except as otherwise stated herein,
Licensor and Licensee each shall be responsible for all costs, expenses, and
taxes, arising from the conduct of its own business.

Article 37 -   Confidentiality:
-------------  ----------------

37.1  Confidentiality.  Notwithstanding any other provision herein, during the
term of this Agreement and for a period of ten (10) years from termination of
this Agreement, each Party ("Receiver") will hold in confidence, will not
disclose to others (except those Affiliates, attorneys, accountants or other
consultants who are bound by an obligation of confidentiality), and will not use
for any purpose not contemplated by this Agreement, any technical or business
information (including the terms and conditions of this Agreement) Receiver
obtains from the other Party ("Discloser") in connection with this Agreement
(collectively, the "Confidential Information").  Receiver shall make Discloser's
Confidential Information available to persons within Receiver's organization
only on a "need to know" basis, and Receiver shall inform all persons to whom
such Confidential Information is made available of the confidential nature of
the Confidential Information and the restrictions comprised hereunder and shall
require such persons to keep the Confidential Information confidential as
provided in this Section.  However, this confidentiality obligation shall not
extend to any portion of the Confidential Information which: (i) is known to
Receiver as documented by its written records at the time of disclosure; or (ii)
is or becomes public or generally available to the public through publication or
otherwise but through no fault of Receiver; or (iii) corresponds in substance to
information furnished to Receiver on a nonconfidential basis by a third party
having a bona fide right to do so and not having any confidential obligation,
direct or indirect, to Discloser with respect to the same; or (iv) corresponds
to information furnished by Discloser to any third party on a nonconfidential
basis except in limited consumer testing; or (v) Receiver can demonstrate was
developed by Receiver independently of the disclosure of the Confidential
Information by Discloser; or (vi) is disclosed by Receiver pursuant to a legal
requirement provided Receiver has complied with the provisions set forth in
Section 37.2 below.

37.2  External Disclosure.  If Receiver becomes legally required to disclose any
of Discloser's Confidential Information, Receiver shall notify Discloser
promptly of such requirement so that Discloser may seek a protective order or
other appropriate remedy concerning such disclosure.  Receiver will consult with
Discloser, if requested to do so, regarding the nature and extent of the
required disclosure and will cooperate to limit such disclosure to the extent
practical.

Article 38 -   Covenant Not To Compete:
-------------  ------------------------

38.1  Covenant Not To Compete.  On the date this Agreement is signed, Paul
Ashton and Thomas Smith, shareholders and officers of Licensor, shall each
execute the Covenants Not to Compete attached as Exhibit 38.

                                       40
<PAGE>

Article 39 - Certain Conditions Subsequent:
------------ ------------------------------

39.1  Preferred Stock Option and Purchase Agreement.  On the date this Agreement
is signed, the Parties shall sign the Preferred Stock Option and Purchase
Agreement, attached as Exhibit 39.1, and Licensor shall file a Certificate of
Amendment substantially in the form attached to such Agreement within thirty
(30) days thereafter.

39.2  UKRF Letter Agreement.  The Parties shall use their good faith best
efforts to enter into a letter agreement, substantially in the form of Exhibit
39.2 with UKRF, within ninety (90) days after the execution of this Agreement.

39.3  Invention Disclosure/Assignment Agreements.  If it has not previously done
so, within thirty (30) days after the date of this Agreement, Licensor shall
cause all of its officers, employees, and consultants to execute confidentiality
and invention disclosure and assignment agreements reasonably satisfactory to
Licensee (a) which require that such individuals observe confidentiality
restrictions at least as strict as those between the Parties with respect to
confidential information of Licensor and Licensee, and (b) which result in
Licensor having unrestricted ownership of any intellectual property created by
such individuals during their employment or engagement by Licensor, including
(without limitation) all intellectual property created or developed by such
individuals before the date of this Agreement.  Licensor shall ensure that
separate and adequate consideration is given to any individual who signs a
confidentiality and invention disclosure and assignment agreement.

Article 40 -   No Limit to Remedies:
-------------  ---------------------

40.1  No Limit to Remedies.  The existence or choice of any one remedy available
to a Party shall not limit or otherwise restrict a Party from choosing any
remedy available, it being understood that a Party's remedies are cumulative.

Article 41 -   Counterparts:
-------------  -------------

41.1  Counterparts.  This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.

                                       41
<PAGE>

IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
executed in duplicate originals by its duly authorized officer or
representative.

BAUSCH & LOMB INCORPORATED                  CONTROL DELIVERY SYSTEMS, INC.


By:/s/ Thomas M. Riedhammer                 By:/s/ Paul Ashton
   ------------------------                    ---------------


Printed Name: Thomas M. Riedhammer          Printed Name: Paul Ashton
              --------------------                        -----------


Title: Senior Vice President and            Title: President
       -------------------------                   ---------
       Chief Technical Officer
       -----------------------

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