Document:

<PAGE>
                                                                   Exhibit 10.37

                                   AGREEMENT

This Agreement (Agreement') made as of the 22 day of October, 2001 ("Effective
Date") by and between Old Glory Boutique Distributing Inc. ("Old Glory"), a
Connecticut corporation having its principal place of business located at 90
Knothe Rd., Westbrook, CT 06498 and ARTISTdirect, Inc., a California corporation
with its principal place of business located at 5670 Wilshire Blvd., Suite 200,
Los Angeles, California 90036 ("AD") (each, a "Party," and collectively, the
"Parties").

WHEREAS, the Parties desire to enter into an agreement whereby, Old Glory shall
provide product sourcing to and product distribution for music-related
merchandise ("Merchandise") that AD will sell through its website currently
titled "Artistdirect.com" (the "AD Site") and any off line distribution as the
Parties may mutually agree.

NOW, THEREFORE, In consideration of the mutual promises and covenants
hereinafter made, the Parties agree as follows:

1.    Product Sourcing by Old Glory

      a.    Old Glory shall provide certain Merchandise, which Merchandise will
be mutually agreed upon from time to time by Old Glory and AD, from Old Glory's
current inventory, to AD for AD's sale to its customers through the AD Site. Old
Glory will provide a list of available inventory at the URL *****. In addition,
Old Glory may procure products specially requested by AD during the Term. The
Parties shall mutually determine the cost of such exclusive, specially requested
products.

      b.    Old Glory may, in its sole discretion, and upon thirty (30) days
prior written notice to AD, exclude certain items of its available Merchandise
offering from AD. In addition, Old Glory may exclude items due to lack of
availability or manufacturers inability to ship.

2.    Product Distribution by Old Glory

      a.    Old Glory shall provide all pick, pack, and ship functions for
Merchandise, including, but not limited to: receiving, tagging, packaging, put
away, picking, printing of invoices, packing, and shipping. In addition, Old
Glory will be responsible for handling all customer returns, subject to Section
4 below. All invoices and mailing labels will show only AD's contact
information, including, but not limited to, company name, address, telephone
number, and AD Site address, without any reference to Old Glory.

      b.    Old Glory shall I provide technical and informational support to AD
and AD's third party customer service provider and merchandising group, as
necessary, to support AD's online retail offering of the Merchandise on the AD
Site. (For example, such support may

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       1
<PAGE>
include providing AD or AD's vendor with information on the availability of
specific items of Merchandise.) Additionally, Old Glory shall provide at least
***** dedicated account ***** for the purpose of supporting AD's merchandising
and customer service activities.

      c.    Old Glory shall provide AD with the ability to transmit and confirm
Merchandise orders electronically, and Merchandise inventory look up
capabilities for the purpose of order inquiry and AD Site maintenance.

      d.    During the term of this Agreement Old Glory shall create a ***** for
consumers that AD may pass through to its consumers if AD chooses to participate
in such *****.

      e.    Old Glory shall create the functionality described in this Section 2
in accordance with the Technical Requirements set forth in Attachment A. In
addition, the services described in this Section 2 shall conform to the Service
Level Agreement set forth in Attachment B.

      f.    Old Glory shall use its best efforts to ship all orders received by
Old Glory by 3:00 p.m. Eastern Time, Monday through Thursday, the same day. All
orders received after 3:00 p.m. Eastern Time, Monday through Thursday, shall be
shipped the following day. All orders received after 3:00 p.m. Eastern Time on
Friday shall be shipped on the following Monday, unless Old Glory elects to ship
such order sooner.

      g.    Old Glory shall notify AD, in writing, of any changes and/or
adjustments to the schedule set forth in Section 2(f) at least seven (7) days
prior to any such change and/or adjustment.

      h.    Old Glory shall use its best efforts to completely ship *****% of
all orders within twenty-four hours of its receipt of such orders. In addition
Old Glory shall use its best efforts to report to AD on a daily basis any orders
not shipped completely, including information regarding when the balance of any
such incomplete order will be shipped, or if AD ought to notify the customer
that the balance of the order can not be shipped and therefore will be
cancelled, excluding prebook items, and special request and special delivery
items.

3.    Fees and Costs

      a.    In consideration of Old Glory's services as set forth in this
agreement, AD will pay Old Glory for any Merchandise that Old Glory procures and
distributes pursuant to this agreement at Old Glory's retail price for such
Merchandise *****. Old Glory's "retail price" is defined as the retail selling
price for Merchandise listed on the website located at ***** (the "Old Glory
Site"), which list will be maintained and updated regularly by Old Glory during
the Term.

      b.    Notwithstanding the foregoing, during the first sixty (60) days
after the commencement of the term of this agreement Old Glory will sell
Merchandise that it provides to AD hereunder, at Old Glory's retail price for
such Merchandise ***** to help defer the initial

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       2
<PAGE>
set-up costs of entering into this agreement with AD. For the avoidance of
doubt, except as expressly set forth herein, all other costs associated with any
technology or set-up will be borne by the Party incurring such costs.

      c.    AD will pay actual shipping costs, without mark-up resulting from
the distribution of Merchandise hereunder by United States Postal Service,
Federal Express, Airborne, and United Postal Service. Old Glory will invoice AD
for such costs in accordance with the attached shipping costs table attached
hereto as Attachment C.

      d.    "Tyvec" shipping envelopes will be considered standard packaging,
and Old Glory will not charge AD any fees for such packaging. AD will pay all
costs associated with invoices and/or shipping labels that include the
proprietary trademarks, service marks, and/or trade names of AD.

      e.    In addition to the fees set forth above, Old Glory will charge AD a
fee of ***** ($*****) (the "Distribution Fee") for each order fulfilled and
shipped by Old Glory pursuant to this agreement, which fee amounts Old Glory
will calculate as of the end of each calendar week during the Term. The weekly
billing period will run from Friday 9:00 a.m. Pacific Time through Friday 8:59
a.m. Pacific time, and Old Glory will submit invoices for each billing period on
the last Friday of each billing period no later than 12:00 p.m. Pacific Time. AD
will pay such invoices on net ten (10) day terms. Notwithstanding the foregoing,
the individual orders that require more than one shipment will entitle Old Glory
to ***** Distribution Fee.

4.    Payment on Account

On even date hereof, AD will pay on account to Old Glory the sum of $***** an
amount representing ***** projected average billings from Old Glory to AD.
Thereafter, on a monthly basis, AD will adjust its ***** payments to Old Glory
to adjust the amount on account up or down, depending upon Merchandise sales
volume, in order to equate to an approximate (+/- *****%) trailing ***** sales
average. For example, if the first week's billings from Old Glory to AD are
$*****, AD will remit to Old Glory an amount equal to $***** on the payment
terms set forth herein. If at the end of the first calendar month of the Term,
the average weekly billings are $***** per week, AD will increase the payment on
account by $*****. If the billings are $***** per week, AD will take a credit of
$***** against amounts otherwise due hereunder. After 180 days, AD will have the
right to take a credit against amounts due Old Glory hereunder up to the amount
remaining on account.

5.    Returns

In addition to the fees set forth above, Old Glory will charge AD a fee of *****
($*****) (the "Return Fee") for each Merchandise return by an AD Site customer,
which return is not due to a shipping error or Merchandise damage. The Return
Fee includes all fees associated with preparing return packages to customers.
Old Glory will issue full credit to AD for orders shipped

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       3
<PAGE>
in error or for damaged Merchandise. The determination as to the basis of any
returns will be based upon Old Glory's customer service return codes. For
purposes of this Section 5, "full credit" will mean the *****.

6.    Insertions

      a.    In each order shipped by Old Glory pursuant to this agreement, Old
Glory shall include one (1) paper insert at AD's request. Any additional mailing
cost as a result of such insert will be AD's responsibility.

      b.    In the event that AD chooses to insert products in any orders
hereunder, Old Glory shall charge AD ***** ($*****) per unit inserted, or *****
percent (*****%) of AD's revenue derived from such orders that include product
inserts. Any additional shipping costs incurred as a result of such insertions
will be borne by AD, or offset by the manufacturer. In the event that AD, in
cooperation with a third party manufacturer, requests that Old Glory participate
in any insertion program developed by AD, the Parties shall mutually agree upon
the terms of Old Glory's involvement in any such insertion program.

7.    Exclusivity

During the term of this Agreement, Old Glory shall not solicit or enter into any
agreement with any third party artist, third party artist manager or management
company, or third party record label, for the purpose of establishing an
"official" artist online store or an online store linked to, or accessible
directly through an artist's website.

8.    Term and Termination

      a.    The initial term of the agreement shall be six (6) months and shall
commence on November 1, 2001. The Agreement shall automatically renew for two
(2) successive one (1)-year periods unless either Party gives the other Party
written notice of its intent not to renew the agreement no less than ninety (90)
days before the end of the initial term or any extended term. Notwithstanding
anything herein stated to the contrary, this Agreement shall not be
automatically renewed unless, additionally, the Parties have renegotiated
paragraph 4 above and have both agreed in writing to any modifications of same.

      b.    Notwithstanding anything to the contrary herein, at any time, either
party may terminate this Agreement upon no less than ninety (90) days' prior
written notice to the other party for any reason or no reason at all.

9.    Confidentiality

         The terms and provisions of this Agreement shall be kept confidential
by both Parties and shall not be disclosed by either Party to any third party
except as may be required by any court

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       4
<PAGE>
order or governmental agency, and except to a party's accountants, auditors,
agents, and legal counsel on a need-to-know basis.

10.   Other Terms

      a.    Rights in User Data and Other Intellectual Property. Old Glory
hereby agrees and acknowledges that, as between Old Glory and AD, all right,
title and interest in (i) all customer data generated in connection with this
agreement, whether by Old Glory employees or representatives, or such employees
or representatives working with AD, and (ii) any intellectual property of AD,
including trademark rights, copyrights, rights of publicity, patent rights and
any and all other intellectual property rights of whatever kind or nature
therein and thereto, shall be solely and exclusively owned by AD throughout the
universe and in perpetuity.

      b.    Default. Any of the following will constitute a "Default" under this
Agreement:

            (i)   a material breach by either Party of this Agreement;

            (ii)  AD's failure to perform its payment obligation, which
                  continues without cure for a seven (7) day period written
                  notice thereof;

            (iii) the filing of a petition for bankruptcy by a Party, the
                  insolvency of a Party, or the filing of an involuntary
                  petition for bankruptcy against a Party which is not dismissed
                  within thirty (30) days of such filing;

            (iv)  the mutual agreement in writing by both Parties; or

            (v)   any representation, warranty, or certificate given or
                  furnished by either Party shall prove to be materially false
                  as of the date that such warranty, representation or
                  certification was given.

      c.    Assignment. The Agreement will be binding upon and inure to the
benefit of each Party's respective successors and lawful assigns; provided,
however, that neither Party shall assign the Agreement nor transfer any of its
rights and/or obligations hereunder without the written consent of the other
Party; further provided, however, that either Party, without the written consent
of the other Party, may assign its rights and obligations under the Agreement to
an entity that acquires all or substantially all of such Party's business stock
or assets. After notice of such is given to the other Party. Any attempted
assignment, sublicense, transfer, encumbrance or other disposition by either
Party in violation of this Section shall be null and void and of no effect and
shall constitute a breach of the Agreement, for which the sole remedy of the
non-breaching Party's shall be the termination of this Agreement.

      d.    Disclaimer. Old Glory shall utilize good faith commercially
reasonable efforts to perform its obligations here, and simple or non-negligent
errors should not rise to the level of material default. Old Glory shall not be
responsible for the verification or review of the accuracy, relevance, or
legality of information provided by AD for communication or use in the
performance of Services and, so long as Old Glory uses such information in
accordance with AD's directions, AD waives any claim related thereto.

                                       5
<PAGE>
      e.    Limitation of Liability. NEITHER OF THE PARTIES HERETO SHALL HAVE
ANY LIABILITY TO THE OTHER PARTY HERETO OR TO ANY THIRD PARTY FOR ANY INDIRECT,
SPECIAL, CONSEQUENTIAL, EXEMPLARY, INCIDENTAL, OR PUNITIVE DAMAGES ARISING UNDER
THE TERMS OF THIS AGREEMENT, EVEN IF ADVISED IN ADVANCE OF THE POSSIBILITY OF
SUCH DAMAGES, EXCEPT IN INSTANCES OF FRAUD AD acknowledges that nothing in this
Agreement shall be deemed to establish a contractual or other legally
recognizable relationship between Old Glory and a customer, it being agreed that
the Services provided hereunder are for AD's benefit.

      f.    Miscellaneous

            (1) This Agreement, its performance, and all suits and special
proceedings pursuant to this Agreement will be construed in accordance with the
laws of the State of California. Any controversy or claim arising out of or
relating to this Agreement, or the breach of this Agreement, shall be brought
only on the State and/or Federal Courts located in: (a) Los Angeles, California
if brought by Old Glory, or (b) Hartford, Connecticut if brought by AD. (2) No
waiver or modification of this Agreement or any covenant, condition or
limitation contained herein shall be valid unless in writing and executed by
both Parties. (3) Should any part of this Agreement be held unenforceable or in
conflict with the applicable laws or regulations of any jurisdiction, the
invalid or unenforceable part or provision shall be replaced with a provision
which accomplishes, to the extent possible, the original business purpose of
such part or provision in a valid and enforceable manner, and the remainder of
this Agreement shall remain binding upon the Parties. (4) Each party
acknowledges that it has read this Agreement, understands it, and agrees to be
bound by its terms. (5) This Agreement represents the entire understanding of
the parties with respect to the subject matter hereof and supersedes all prior
agreements, negotiations, understandings, representations, statements and
writings between the parties relating thereto with regard to the subject matter
hereof. (6) All powers and remedies given by this Agreement shall be cumulative
and in addition to those provided by law. (7) This Agreement may be executed in
several counterparts, each of which shall be deemed an original for all
purposes. (8) Neither failure nor delay on the part of one Party in exercising
any right under this Agreement shall operate as a waiver of such right, nor
shall any single or partial exercise of any such right preclude any further
exercise thereof or the exercise of any other right.

      g.    Indemnification. Each party agrees to defend, indemnify and hold
harmless the other party and its successors, and assigns, from and against any
and all third-party claims, liabilities, costs and expenses (including
attorneys' and accountants' fees reasonably incurred) in connection with any
material breach of the provisions of this Agreement by the other party (the
"Indemnifying Party"). The "Other Party" (i.e., the party entitled under this
Section) to be indemnified) shall not settle any claim without first notifying
the Indemnifying Party of terms of any proposed settlement and obtaining its
prior written consent thereto; however, if the Indemnifying Party does not wish
to consent to the proposed settlement, it shall nevertheless be deemed to have
consented thereto unless the Indemnifying Party posts, within ten (10) days
after such notice, a bond, satisfactory to the Other Party in its reasonable
discretion, to assure the Other Party of reimbursement for all damages,
liabilities, costs and expenses (including legal expenses and counsel fees
reasonably incurred) that the Other Party, in its reasonable business judgment,
will incur as a result of such a claim. The Indemnifying Party shall, upon
demand, pay the person or entity being indemnified hereunder for any payment
made or required to be made

                                       6
<PAGE>
by such person or entity at any time (including after the Term) in respect of
any liability, damage, or expense to which the foregoing indemnity relates.

      h.    Notice. All notices given to the parties hereunder and all
statements and payments hereunder shall be addressed to the parties at the
address set forth below or at such other address as shall be designated by the
parties in writing from time to time:

            If to AD:

            ARTISTdirect, Inc.
            5670 Wilshire Boulevard, Suite 200
            Los Angeles, California 90036
            Attn:  Legal & Business Affairs Department
            Fax:   (323) 634-4299

            If to Old Glory:

            Old Glory Boutique Distributing Inc.
            90 Knothe Rd.
            PO Box 1040
            Westbrook, CT 06498-1040
            Fax:   (880) 399-7786

All notices shall be in writing and shall be personally delivered, or served by
certified mail, return receipt requested, or by overnight mail service such as
Federal Express, all charges pre-paid. Except as otherwise provided herein, such
notices shall be deemed given three days after mailing or delivery to an
overnight mail service, all charges prepaid, except that notices of change of
address shall be effective only after actual receipt thereof. The failure of the
recipient to accept or receive notice given by certified mail, return receipt
requested, postage pre-paid, shall not affect the validity of the notice.

      i.    Force Majeure. The Parties shall be excused for the period of any
delay in the performance of any obligations hereunder when prevented from doing
so by cause or causes beyond either party's control which shall include, without
limitation, all labor disputes, civil disturbance, war, warlike operations,
invasions, rebellion, hostilities, military or usurped power, sabotage,
governmental regulations or controls, fires or other casualty, inability to
obtain any material or service or acts of God. Nothing contained in this
paragraph shall excuse AD from paying in a timely fashion any payments due under
the terms of this Agreement.

(signatures follow)

                                       7
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the dates set forth below.

ARTISTdirect, INC.                          OLD GLORY Boutique Distributing Inc.

By:  /s/ THOMAS F. FUELLING                 By:  /s/ GLENN MORELLI
   --------------------------------            ---------------------------------
Print Name:  THOMAS F. FUELLING             Print Name:  GLENN MORELLI
           ------------------------                    -------------------------
Title:  EVP, FINANCE & OPERATIONS           Title:  President/CEO
      -----------------------------               ------------------------------
Date:           10/23/01                    Date:             10/22/01
     ------------------------------              -------------------------------

                                       8
<PAGE>
                                  ATTACHMENT A

                             TECHNICAL REQUIREMENTS

1.    Old Glory will provide electronic transaction interfaces to its technology
system for the purposes of fulfilling its obligations as set forth in this
Agreement. Old Glory will provide AD access to its technology through a two
(2)-phase process as follows:

      a.    Phase One

      i.    Upon execution of this Agreement, Old Glory will provide AD with a
      dedicated PC computer and printer that matches certain technical
      specifications to be provided by AD, including, but not limited to, a
      dedicated Internet link capable of 3DES VPN connectivity, at Old Glory's
      warehouse facility, which computer and printer will have access to AD's
      e-commerce software, SAP, for the purpose of printing AD's Merchandise
      orders pursuant to this Agreement. Old Glory will manually acknowledge,
      pick, pack, and ship such orders.

      ii.   Phase One technology will include the capability to accomplish the
      following:

            A.    Inventory Inquiry From AD. Old Glory will develop a real-time
      interface, which interface will, upon query, return current inventory
      information for a requested SKU that will allow AD to present availability
      information to consumers in accordance with mutually agreed business
      rules.

            B.    Order Inquiry From AD. Old Glory will develop a real-time
      interface capable of responding with fulfillment status information for a
      requested order that will allow AD to present availability information to
      the consumer in accordance with mutually agreed business rules.

      b.    Phase Two

      i.    Upon execution of this Agreement, Old Glory will develop technology
      interfaces to accomplish the following:

            A.    Old Glory will develop a real-time interface capable of
      returning status of success, or failure with reason codes for Old Glory's
      receipt of consumer orders to be shipped on behalf of AD.

            B.    Old Glory will develop a real-time or batch interface for
      sending acknowledgement of orders to be shipped on behalf of AD. If the
      technology makes partial shipments possible, such interface must provide
      line item detail.

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<PAGE>
            C.    Old Glory will develop a real-time or batch interface for
      sending acknowledgement of consumer returns received by Old Glory. Return
      disposition as to whether a consumer will receive credit will be included.

2.    All real-time interfaces will use standard http protocol, with well formed
XML data documents. All batch interfaces will be ascii text file format
containing well formed XML data documents, transmitted via FTP.

3.    Old Glory will provide access to technical and business personnel for the
purpose of defining mutually agreed business rules, integration testing, and
implementation support as needed.

4.    Old Glory will provide ongoing access to technical personnel for technical
support of the interfaces as needed.

                                       10
<PAGE>
                                  ATTACHMENT B

                        SERVICE LEVEL AGREEMENT ("SLA")

1.    Overview. Old Glory's technical infrastructure shall serve the functions
      outlined in Attachment A (Technical Requirements) with such performance
      that that ARTISTdirect website will not be slowed down when using such
      functions.

2.    Service Level. Old Glory shall use its best efforts so that its services
      shall be available to users a minimum of *****% of the time and that there
      would be no interruption in such public accessibility that exceeds *****.
      Exceptions to the foregoing availability levels will be: routine scheduled
      maintenance for which Old Glory will give ARTlSTdirect prior written
      notice as set forth in Section 3 below, and planned outages (as defined
      below), force majeure events, and any other events beyond Old Glory's
      reasonable control.

3.    Maintenance. Old Glory will use best efforts to limit routine scheduled
      maintenance and planned outages to the hours between *****. Old Glory will
      use its best efforts to provide ARTlSTdirect with written notification of
      any routine scheduled maintenance and/or planned outages no later than by
      5:00 p.m. Pacific Time on the previous business day. For purposes of this
      SLA, email notification to ARTlSTdirect's Chief Information Office and/or
      another individual identified by ARTlSTdirect shall be sufficient written
      notification hereunder. Old Glory shall use its best efforts so that
      routine scheduled maintenance and planned outages will not occur for more
      than ***** in any ***** period.

4.    Site Response Time. "Response time" means the total time to retrieve a
      given query from Old Glory's service, including DNS lookup, connect time,
      response time, and download time of the resulting pages. Average response
      time is defined to be the average of global round trip times as measured
      by the Keynote service.

5.    Query Result Rendering. Old Glory shall use its best efforts so that
      performance will be between ***** for *****% of all queries, at a minimum,
      including inventory queries for multiple items.

6.    Upgrades. Old Glory will perform all upgrades requiring system service
      downtime within the routine scheduled maintenance window set forth in
      Section 3 above, to the extent possible.

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       11
<PAGE>
                                  ATTACHMENT C

                                 SHIPPING TABLE

                               ARTISTDIRECT, INC.

  **This is a proposal of rates and charges subject to customer acceptance and
                  approval by Airborne's Pricing department.**

 Rates and charges apply based on monthly domestic net freight revenue of *****
   subsequent to a ***** start-up period. ***** are guaranteed for ***** from
 implementation date based on customer's existing geographic shipment profile.

                               SECOND DAY SERVICE

<TABLE>
<CAPTION>
Ltr         *****   *****   *****   *****   *****   *****   *****
(8oz)
----------------------------------------------------------------------------------------------------------------------------------
  Lbs.       2       3       4       5       6       7       8       Lbs.      2       3       4       5       6       7       8
----------------------------------------------------------------------------------------------------------------------------------
<S>        <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>       <C>     <C>     <C>     <C>     <C>     <C>     <C>
   1       *****   *****   *****   *****   *****   *****   *****      51     *****   *****   *****   *****   *****   *****   *****
   2       *****   *****   *****   *****   *****   *****   *****      52     *****   *****   *****   *****   *****   *****   *****
   3       *****   *****   *****   *****   *****   *****   *****      53     *****   *****   *****   *****   *****   *****   *****
   4       *****   *****   *****   *****   *****   *****   *****      54     *****   *****   *****   *****   *****   *****   *****
   5       *****   *****   *****   *****   *****   *****   *****      55     *****   *****   *****   *****   *****   *****   *****
   6       *****   *****   *****   *****   *****   *****   *****      56     *****   *****   *****   *****   *****   *****   *****
   7       *****   *****   *****   *****   *****   *****   *****      57     *****   *****   *****   *****   *****   *****   *****
   8       *****   *****   *****   *****   *****   *****   *****      58     *****   *****   *****   *****   *****   *****   *****
   9       *****   *****   *****   *****   *****   *****   *****      59     *****   *****   *****   *****   *****   *****   *****
   10      *****   *****   *****   *****   *****   *****   *****      60     *****   *****   *****   *****   *****   *****   *****
   11      *****   *****   *****   *****   *****   *****   *****      61     *****   *****   *****   *****   *****   *****   *****
   12      *****   *****   *****   *****   *****   *****   *****      62     *****   *****   *****   *****   *****   *****   *****
   13      *****   *****   *****   *****   *****   *****   *****      63     *****   *****   *****   *****   *****   *****   *****
   14      *****   *****   *****   *****   *****   *****   *****      64     *****   *****   *****   *****   *****   *****   *****
   15      *****   *****   *****   *****   *****   *****   *****      65     *****   *****   *****   *****   *****   *****   *****
</TABLE>

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       12
<PAGE>
<TABLE>
<S>        <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>       <C>     <C>     <C>     <C>     <C>     <C>     <C>
   16      *****   *****   *****   *****   *****   *****   *****      66     *****   *****   *****   *****   *****   *****   *****
   17      *****   *****   *****   *****   *****   *****   *****      67     *****   *****   *****   *****   *****   *****   *****
   18      *****   *****   *****   *****   *****   *****   *****      68     *****   *****   *****   *****   *****   *****   *****
   19      *****   *****   *****   *****   *****   *****   *****      69     *****   *****   *****   *****   *****   *****   *****
   20      *****   *****   *****   *****   *****   *****   *****      70     *****   *****   *****   *****   *****   *****   *****
   21      *****   *****   *****   *****   *****   *****   *****      71     *****   *****   *****   *****   *****   *****   *****
   22      *****   *****   *****   *****   *****   *****   *****      72     *****   *****   *****   *****   *****   *****   *****
   23      *****   *****   *****   *****   *****   *****   *****      73     *****   *****   *****   *****   *****   *****   *****
   24      *****   *****   *****   *****   *****   *****   *****      74     *****   *****   *****   *****   *****   *****   *****
   25      *****   *****   *****   *****   *****   *****   *****      75     *****   *****   *****   *****   *****   *****   *****
   26      *****   *****   *****   *****   *****   *****   *****      76     *****   *****   *****   *****   *****   *****   *****
   27      *****   *****   *****   *****   *****   *****   *****      77     *****   *****   *****   *****   *****   *****   *****
   28      *****   *****   *****   *****   *****   *****   *****      78     *****   *****   *****   *****   *****   *****   *****
   29      *****   *****   *****   *****   *****   *****   *****      79     *****   *****   *****   *****   *****   *****   *****
   30      *****   *****   *****   *****   *****   *****   *****      80     *****   *****   *****   *****   *****   *****   *****
   31      *****   *****   *****   *****   *****   *****   *****      81     *****   *****   *****   *****   *****   *****   *****
   32      *****   *****   *****   *****   *****   *****   *****      82     *****   *****   *****   *****   *****   *****   *****
   33      *****   *****   *****   *****   *****   *****   *****      83     *****   *****   *****   *****   *****   *****   *****
   34      *****   *****   *****   *****   *****   *****   *****      84     *****   *****   *****   *****   *****   *****   *****
   35      *****   *****   *****   *****   *****   *****   *****      85     *****   *****   *****   *****   *****   *****   *****
   36      *****   *****   *****   *****   *****   *****   *****      86     *****   *****   *****   *****   *****   *****   *****
   37      *****   *****   *****   *****   *****   *****   *****      87     *****   *****   *****   *****   *****   *****   *****
   38      *****   *****   *****   *****   *****   *****   *****      88     *****   *****   *****   *****   *****   *****   *****
   39      *****   *****   *****   *****   *****   *****   *****      89     *****   *****   *****   *****   *****   *****   *****
   40      *****   *****   *****   *****   *****   *****   *****      90     *****   *****   *****   *****   *****   *****   *****
   41      *****   *****   *****   *****   *****   *****   *****      91     *****   *****   *****   *****   *****   *****   *****
   42      *****   *****   *****   *****   *****   *****   *****      92     *****   *****   *****   *****   *****   *****   *****
   43      *****   *****   *****   *****   *****   *****   *****      93     *****   *****   *****   *****   *****   *****   *****
   44      *****   *****   *****   *****   *****   *****   *****      94     *****   *****   *****   *****   *****   *****   *****
   45      *****   *****   *****   *****   *****   *****   *****      95     *****   *****   *****   *****   *****   *****   *****
   46      *****   *****   *****   *****   *****   *****   *****      96     *****   *****   *****   *****   *****   *****   *****
   47      *****   *****   *****   *****   *****   *****   *****      97     *****   *****   *****   *****   *****   *****   *****
   48      *****   *****   *****   *****   *****   *****   *****      98     *****   *****   *****   *****   *****   *****   *****
   49      *****   *****   *****   *****   *****   *****   *****      99     *****   *****   *****   *****   *****   *****   *****
   50      *****   *****   *****   *****   *****   *****   *****   100/CWT   *****   *****   *****   *****   *****   *****   *****
</TABLE>

Rates subject to change without notice and void if residential shipment exceed
*****% of total shipments. Reselling is prohibited.

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       13
<PAGE>
                                  ARTISTDIRECT

  **This is a proposal of rates and charges subject to customer acceptance and
                  approval by Airborne's Pricing department.**

Rates and charges apply based on monthly domestic net freight revenue of $*****
   subsequent to a ***** start-up period. ***** are guaranteed for ***** from
 implementation date based on customer's existing geographic shipment profile.

                             NEXT AFTERNOON SERVICE

<TABLE>
<CAPTION>
Ltr         *****   *****   *****   *****   *****   *****   *****
(8oz)
----------------------------------------------------------------------------------------------------------------------------------
  Lbs.       2       3       4       5       6       7       8       Lbs.      2       3       4       5       6       7       8
----------------------------------------------------------------------------------------------------------------------------------
<S>        <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>       <C>     <C>     <C>     <C>     <C>     <C>     <C>
   1       *****   *****   *****   *****   *****   *****   *****      51     *****   *****   *****   *****   *****   *****   *****
   2       *****   *****   *****   *****   *****   *****   *****      52     *****   *****   *****   *****   *****   *****   *****
   3       *****   *****   *****   *****   *****   *****   *****      53     *****   *****   *****   *****   *****   *****   *****
   4       *****   *****   *****   *****   *****   *****   *****      54     *****   *****   *****   *****   *****   *****   *****
   5       *****   *****   *****   *****   *****   *****   *****      55     *****   *****   *****   *****   *****   *****   *****
   6       *****   *****   *****   *****   *****   *****   *****      56     *****   *****   *****   *****   *****   *****   *****
   7       *****   *****   *****   *****   *****   *****   *****      57     *****   *****   *****   *****   *****   *****   *****
   8       *****   *****   *****   *****   *****   *****   *****      58     *****   *****   *****   *****   *****   *****   *****
   9       *****   *****   *****   *****   *****   *****   *****      59     *****   *****   *****   *****   *****   *****   *****
   10      *****   *****   *****   *****   *****   *****   *****      60     *****   *****   *****   *****   *****   *****   *****
   11      *****   *****   *****   *****   *****   *****   *****      61     *****   *****   *****   *****   *****   *****   *****
   12      *****   *****   *****   *****   *****   *****   *****      62     *****   *****   *****   *****   *****   *****   *****
   13      *****   *****   *****   *****   *****   *****   *****      63     *****   *****   *****   *****   *****   *****   *****
   14      *****   *****   *****   *****   *****   *****   *****      64     *****   *****   *****   *****   *****   *****   *****
   15      *****   *****   *****   *****   *****   *****   *****      65     *****   *****   *****   *****   *****   *****   *****
   16      *****   *****   *****   *****   *****   *****   *****      66     *****   *****   *****   *****   *****   *****   *****
   17      *****   *****   *****   *****   *****   *****   *****      67     *****   *****   *****   *****   *****   *****   *****
   18      *****   *****   *****   *****   *****   *****   *****      68     *****   *****   *****   *****   *****   *****   *****
   19      *****   *****   *****   *****   *****   *****   *****      69     *****   *****   *****   *****   *****   *****   *****
   20      *****   *****   *****   *****   *****   *****   *****      70     *****   *****   *****   *****   *****   *****   *****
   21      *****   *****   *****   *****   *****   *****   *****      71     *****   *****   *****   *****   *****   *****   *****
   22      *****   *****   *****   *****   *****   *****   *****      72     *****   *****   *****   *****   *****   *****   *****
   23      *****   *****   *****   *****   *****   *****   *****      73     *****   *****   *****   *****   *****   *****   *****
   24      *****   *****   *****   *****   *****   *****   *****      74     *****   *****   *****   *****   *****   *****   *****
</TABLE>

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       14
<PAGE>
<TABLE>
<CAPTION>
<S>        <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>       <C>     <C>     <C>     <C>     <C>     <C>     <C>
   25      *****   *****   *****   *****   *****   *****   *****      75     *****   *****   *****   *****   *****   *****   *****
   26      *****   *****   *****   *****   *****   *****   *****      76     *****   *****   *****   *****   *****   *****   *****
   27      *****   *****   *****   *****   *****   *****   *****      77     *****   *****   *****   *****   *****   *****   *****
   28      *****   *****   *****   *****   *****   *****   *****      78     *****   *****   *****   *****   *****   *****   *****
   29      *****   *****   *****   *****   *****   *****   *****      79     *****   *****   *****   *****   *****   *****   *****
   30      *****   *****   *****   *****   *****   *****   *****      80     *****   *****   *****   *****   *****   *****   *****
   31      *****   *****   *****   *****   *****   *****   *****      81     *****   *****   *****   *****   *****   *****   *****
   32      *****   *****   *****   *****   *****   *****   *****      82     *****   *****   *****   *****   *****   *****   *****
   33      *****   *****   *****   *****   *****   *****   *****      83     *****   *****   *****   *****   *****   *****   *****
   34      *****   *****   *****   *****   *****   *****   *****      84     *****   *****   *****   *****   *****   *****   *****
   35      *****   *****   *****   *****   *****   *****   *****      85     *****   *****   *****   *****   *****   *****   *****
   36      *****   *****   *****   *****   *****   *****   *****      86     *****   *****   *****   *****   *****   *****   *****
   37      *****   *****   *****   *****   *****   *****   *****      87     *****   *****   *****   *****   *****   *****   *****
   38      *****   *****   *****   *****   *****   *****   *****      88     *****   *****   *****   *****   *****   *****   *****
   39      *****   *****   *****   *****   *****   *****   *****      89     *****   *****   *****   *****   *****   *****   *****
   40      *****   *****   *****   *****   *****   *****   *****      90     *****   *****   *****   *****   *****   *****   *****
   41      *****   *****   *****   *****   *****   *****   *****      91     *****   *****   *****   *****   *****   *****   *****
   42      *****   *****   *****   *****   *****   *****   *****      92     *****   *****   *****   *****   *****   *****   *****
   43      *****   *****   *****   *****   *****   *****   *****      93     *****   *****   *****   *****   *****   *****   *****
   44      *****   *****   *****   *****   *****   *****   *****      94     *****   *****   *****   *****   *****   *****   *****
   45      *****   *****   *****   *****   *****   *****   *****      95     *****   *****   *****   *****   *****   *****   *****
   46      *****   *****   *****   *****   *****   *****   *****      96     *****   *****   *****   *****   *****   *****   *****
   47      *****   *****   *****   *****   *****   *****   *****      97     *****   *****   *****   *****   *****   *****   *****
   48      *****   *****   *****   *****   *****   *****   *****      98     *****   *****   *****   *****   *****   *****   *****
   49      *****   *****   *****   *****   *****   *****   *****      99     *****   *****   *****   *****   *****   *****   *****
   50      *****   *****   *****   *****   *****   *****   *****   100/CWT   *****   *****   *****   *****   *****   *****   *****
</TABLE>

Rates subject to change without notice and void if residential shipment exceed
*****% of total shipments. Reselling is prohibited.

Recipient agrees not to disclose this information to any third party.

--------
      * In accordance with Rule 24b-2 under the Securities and Exchange Act of
1934, this confidential information has been omitted from this exhibit pursuant
to a request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

                                       15ISTA Pharmaceutical, Inc.

 

EXHIBIT 10.1

ISTA PHARMACEUTICALS, INC.

CHANGE OF CONTROL SEVERANCE AGREEMENT

     This Change of Control Severance Agreement (the “Agreement”) is made and
entered into effective as of August      , 2002 (the “Effective Date”), by and
between _______________ (the “Employee”) and ISTA Pharmaceuticals, Inc., a
Delaware corporation (the “Company”). Certain capitalized terms used in this
Agreement are defined in Section 1 below.

R E C I T A L S

     A. It is expected that the Company from time to time will consider the
possibility of a Change of Control. The Board of Directors of the Company (the
“Board”) recognizes that such consideration can be a distraction to the
Employee and can cause the Employee to consider alternative employment
opportunities.

     B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to maximize the value of the Company upon a Change of Control
for the benefit of its stockholders.

     C. In order to provide the Employee with enhanced financial security and
sufficient encouragement to remain with the Company notwithstanding the
possibility of a Change of Control, the Board believes that it is imperative to
provide the Employee with certain severance benefits upon the Employee’s
termination of employment following a Change of Control.

AGREEMENT

     In consideration of the mutual covenants herein contained and the
continued employment of Employee by the Company, the parties agree as follows:

     1. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:

          (a) Cause. “Cause” shall mean (i) any act of personal dishonesty taken by
the Employee in connection with his responsibilities as an employee which is
intended to result in substantial personal enrichment of the Employee, (ii)
Employee’s conviction of a felony which the Board reasonably believes has had
or will have a material detrimental effect on the Company’s reputation or
business, (iii) a willful act by the Employee which constitutes misconduct and
is injurious to the Company, and (iv) continued willful violations by the
Employee of the Employee’s obligations to the Company after there has been
delivered to the Employee a written demand for performance from the Company
which describes the basis for the Company’s belief that the Employee has not
substantially performed his duties.

          (b) Change of Control. “Change of Control” shall mean the occurrence of
any of the following events:

 

 

               (i) the approval by stockholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; provided, however,
that any such merger or consolidation as a result of a Going Private
Transaction (defined hereafter) pursuant to Rule 13e-3 of the Securities
Exchange Act of 1934 (the “Act”) shall not constitute a Change of Control;

               (ii) the approval by the stockholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets;

               (iii) any “person” (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becoming the “beneficial
owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company’s then outstanding voting securities;
provided, however, that any such “person” becoming a “beneficial owner” of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company’s then outstanding voting securities as
a result of (A) a financing of the Company (as reasonably determined by the
Company), (B) a Going Private Transaction (defined hereafter) pursuant to Rule
13e-3 of the Act, or (C) an all cash tender offer by a private equity firm,
venture capital firm or other financial buyer (as reasonably determined by the
Company) shall not constitute a Change of Control; or

               (iv) a change in the composition of the Board, as a result of which fewer
than a majority of the directors are Incumbent Directors. “Incumbent
Directors” shall mean directors who either (A) are directors of the Company as
of the date hereof, or (B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with any transactions described in
subsections (i), (ii), or (iii) or in connection with an actual or threatened
proxy contest relating to the election of directors of the Company; provided,
however, that any such change in the composition of the Board as a result of a
financing of the Company (as reasonably determined by the Company) shall not
constitute a Change of Control.

          (c) Going Private Transaction. “Going Private Transaction” shall mean any
transaction or series of transactions involving one or more of the following
transactions:

               (i) a purchase of any equity security by the issuer of such security or by
an affiliate of such issuer;

               (ii) a tender offer for or request or invitation for tenders of any equity
security made by the issuer of such class of securities or by an affiliate of
such issuer; or

-2-

 

               (iii) a solicitation subject to Regulation 14A of the Act of any proxy,
consent or authorization of, or a distribution subject to Regulation 14C of the
Act of information statements to, any equity security holder by the issuer of
the class of securities or by an affiliate of such issuer, in connection with:
a merger, consolidation, reclassification, recapitalization, reorganization or
similar corporate transaction of any issuer or between an issuer (or its
subsidiaries) and its affiliate; a sale of substantially all the assets of an
issuer to its affiliate or group of affiliates; or a reverse stock split of any
class of equity securities of the issuer involving the purchase of fractional
interests,

which has either a reasonable likelihood or a purpose of producing, either
directly or indirectly, any of the following effects:

               (i) causing any class of equity securities of the issuer which is subject
to section 12(g) or section 15(d) of the Act to be held of record by less than
300 persons; or

               (ii) causing any class of equity securities of the issuer which is either
listed on a national securities exchange or authorized to be quoted in an
inter-dealer quotation system of a registered national securities association
to be neither listed on any national securities exchange nor authorized to be
quoted on an inter-dealer quotation system of any registered national
securities association.

          (d) Involuntary Termination. “Involuntary Termination” shall mean without
the Employee’s express written consent, (i) a significant reduction of the
Employee’s duties, position or responsibilities relative to the Employee’s
duties, position or responsibilities in effect immediately prior to such
reduction, or the removal of the Employee from such position, duties and
responsibilities, unless the Employee is provided with comparable duties,
position and responsibilities; provided, however, that a reduction in duties,
position or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Financial Officer
of the Company remains as such following a Change of Control but is not made
the Chief Financial Officer of the acquiring corporation) shall not constitute
an “Involuntary Termination;” (ii) a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii)
a reduction by the Company of the Employee’s base salary as in effect
immediately prior to such reduction; (iv) a material reduction by the Company
in the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee’s overall
benefits package is significantly reduced; (v) the relocation of the Employee
to a facility or a location more than fifty (50) miles from his current
location; (vi) any purported termination of the Employee by the Company which
is not effected for Cause or for which the grounds relied upon are not valid;
or (vii) the failure of the Company to obtain the assumption of this Agreement
by any successors contemplated in Section 6 below.

          (e) Termination Date. “Termination Date” shall mean the effective date of
any notice of termination delivered by one party to the other
hereunder.

-3-

 

     2. Term of Agreement. This Agreement shall terminate upon the date that
all obligations of the parties hereto under this Agreement have been satisfied
or, if earlier, on the date, prior to a Change of Control, Employee is no
longer employed by the Company.

     3. At-Will Employment. The Company and the Employee acknowledge that the
Employee’s employment is and shall continue to be at-will, as defined under
applicable law. If the Employee’s employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
established under the Company’s then existing employee benefit plans or
policies at the time of termination.

     4. Severance Benefits.

          (a) Termination Following A Change of Control. If the Employee’s
employment with the Company terminates as a result of an Involuntary
Termination at any time within twenty-four (24) months after a Change of
Control, then, subject to Employee executing and not revoking a release of
claims in the form provided by the Company, Employee shall be entitled to the
following severance benefits:

               (i) 9/12 of Employee’s base salary as in effect as of the date of such
termination, less applicable withholding, payable, at the election of the
Company, either in a lump sum within thirty (30) days of the Involuntary
Termination or at the same rate and in accordance with the Company’s standard
payroll policies over a period of time not to exceed nine (9) months;

               (ii) a pro rata portion of Employee’s target bonus for the year of
termination, if any. Such amount shall equal the product of (x) the target
bonus for the year of termination, multiplied by (y) a fraction, the numerator
of which is the number of months Employee was employed for the Company during
the year of termination, and denominator of which is twelve (12). The month in
which Employee’s employment terminates shall be considered a full month for
purposes of this calculation;

               (iii) all stock options granted by the Company to the Employee prior to
the Change of Control shall become fully vested and exercisable as of the date
of the termination to the extent such stock options are outstanding and
unexercisable at the time of such termination and all stock subject to a right
of repurchase by the Company (or its successor) that was purchased prior to the
Change of Control shall have such right of repurchase lapse with respect to all
of the shares;

               (iv) the Company shall reimburse Employee’s group medical, dental and
vision plan continuation coverage premiums, if any, with respect to
post-termination health (i.e., medical, vision and dental) coverage under the
Company’s group health plans; provided, however, that (i) the Employee
constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the
Internal Revenue Code of 1986, as amended; and (ii) the Employee elects
continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), within the time period
prescribed pursuant to COBRA. The Company shall reimburse the Employee for the
continuation coverage premiums paid by the Employee to continue coverage until
the earlier

-4-

 

of (i) the date Employee is no longer receiving continuation
coverage pursuant to COBRA, or (ii) nine (9) months from the termination date.

          (b) Termination Apart from a Change of Control. If the Employee’s
employment with the Company terminates other than as a result of an Involuntary
Termination within the twenty-four (24) months following a Change of Control,
then the Employee shall not be entitled to receive severance or other benefits
hereunder, but may be eligible for those benefits (if any) as may then be
established under the Company’s then existing severance and benefits plans and
policies at the time of such termination.

          (c) Accrued Wages and Vacation; Expenses. Without regard to the reason
for, or the timing of, Employee’s termination of employment: (i) the Company
shall pay the Employee any unpaid base salary due for periods prior to the
Termination Date; (ii) the Company shall pay the Employee all of the Employee’s
accrued and unused vacation through the Termination Date; and (iii) following
submission of proper expense reports by the Employee, the Company shall
reimburse the Employee for all expenses reasonably and necessarily incurred by
the Employee in connection with the business of the Company prior to the
Termination Date. These payments shall be made promptly upon termination and
within the period of time mandated by law.

     5. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute “parachute payments” within the meaning of Section 280G of the
Code, and (ii) would be subject to the excise tax imposed by Section 4999 of
the Code (the “Excise Tax”), then Employee’s benefits under this Agreement
shall be either

          (a)  delivered in full, or

          (b)  delivered as to such lesser extent which would result in no portion of
such benefits being subject to the Excise Tax,

     whichever of the foregoing
amounts, taking into account the applicable federal, state and local income
taxes and the Excise Tax, results in the receipt by Employee on an after-tax
basis, of the greatest amount of benefits, notwithstanding that all or some
portion of such benefits may be taxable under Section 4999 of the Code.

     Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section shall be made in writing by the
Company’s independent public accountants (the “Accountants”), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. For purposes of making the calculations required by this
Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the
Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section.

-5-

 

     6. Successors.

          (a) Company’s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company’s business and/or assets
shall assume the Company’s obligations under this Agreement and agree expressly
to perform the Company’s obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term “Company” shall include any successor to the Company’s
business and/or assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.

          (b) Employee’s Successors. Without the written consent of the Company,
Employee shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity. Notwithstanding the
foregoing, the terms of this Agreement and all rights of Employee hereunder
shall inure to the benefit of, and be enforceable by, Employee’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

     7. Notices.

          (a) General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all
notices shall be directed to the attention of its Secretary.

          (b) Notice of Termination. Any termination by the Company for Cause or by
the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with this Section. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the Termination
Date (which shall be not more than 30 days after the giving of such notice).
The failure by the Employee to include in the notice any fact or circumstance
which contributes to a showing of Involuntary Termination shall not waive any
right of the Employee hereunder or preclude the Employee from asserting such
fact or circumstance in enforcing his rights hereunder.

-6-

 

     8. Arbitration.

          (a) Any dispute or controversy arising out of, relating to, or in
connection with this Agreement, or the interpretation, validity, construction,
performance, breach, or termination thereof, shall be settled by binding
arbitration to be held in Orange County, California, in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the “Rules”). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of
the arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator’s decision in any court
having jurisdiction.

          (b) The arbitrator(s) shall apply California law to the merits of any
dispute or claim, without reference to conflicts of law rules. The arbitration
proceedings shall be governed by federal arbitration law and by the Rules,
without reference to state arbitration law. Employee hereby consents to the
personal jurisdiction of the state and federal courts located in California for
any action or proceeding arising from or relating to this Agreement or relating
to any arbitration in which the parties are participants.

          (c) Employee understands that nothing in this Section modifies Employee’s
at-will employment status. Either Employee or the Company can terminate the
employment relationship at any time, with or without Cause.

          (d) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION, CONSTITUTES A WAIVER OF EMPLOYEE’S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:

               (i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF
CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND
FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF
EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR
INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND
DEFAMATION.

               (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL
STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF
1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF
1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS
ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION
201, et seq;

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               (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS
RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

     9. Miscellaneous Provisions.

          (a) No Duty to Mitigate. The Employee shall not be required to mitigate
the amount of any payment contemplated by this Agreement, nor shall any such
payment be reduced by any earnings that the Employee may receive from any other
source.

          (b) Waiver. No provision of this Agreement may be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of
the same condition or provision at another time.

          (c) Integration. This Agreement and any outstanding stock option
agreements and restricted stock purchase agreements referenced herein represent
the entire agreement and understanding between the parties as to the subject
matter herein and supersede all prior or contemporaneous agreements, whether
written or oral, with respect to this Agreement and any stock option agreement
or restricted stock purchase agreement.

          (d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal substantive
laws, but not the conflicts of law rules, of the State of California.

          (e) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

          (f) Employment Taxes. All payments made pursuant to this Agreement shall
be subject to withholding of applicable income and employment taxes.

          (g) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute
one and the same instrument.

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.

	 	 	 
	COMPANY:
	
ISTA Pharmaceuticals, Inc.

	 
	 
	By:	
 

	 
	 	

	 
	 
	
Title:

	 
	 	

	 
	EMPLOYEE:	 	
 

	 
	

	 
	Signature
	 
	 
	

	 
	
Printed Name

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