Document:

<PAGE>

                                                                    Exhibit 10.4
                                                                    ------------

                               LICENSE AGREEMENT

     THIS AGREEMENT, made and entered into this 20th day of October, 1991 (the
Effective Date) and amended as of the 10th day of August, 1993 by and between
the University of Kentucky Research Foundation, a corporation duly organized and
existing under the laws of the Commonwealth of Kentucky and having its principal
office at Lexington, Kentucky, U.S.A. (hereinafter referred to as UKRF), and
Control Delivery Systems, Inc., a corporation duly organized under the laws of
Delaware and having its principal office at Hamden, Connecticut, USA, successor
by merger to Control Delivery Systems, Inc., a Kentucky corporation (hereinafter
referred to as LICENSEE).

                                   WITNESSETH
                                   ----------

     WHEREAS, UKRF is the owner of certain "Patent Rights" (as later defined
herein) relating to sustained release drug delivery devices, and has the right
to grant licenses under said Patent Rights; and

     WHEREAS, UKRF desires to have the Patent Rights utilized in the public
interest and is willing to grant a 1icense thereunder; and

     WHEREAS, LICENSEE. has represented to UKRF, to induce UKRF to enter into
this Agreement, that it shall commit itself to a program of exploiting the
Patent Rights to the end that public utilization shall result therefrom; and

     WHEREAS, LICENSEE desires to obtain a license under the Patent Rights upon
the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:

Article 1 -   Definitions
-------------------------
     For the purposes of this Agreement, the following words and phrases shall
have the following meanings:

1.1  "Affiliate" shall mean any corporation, or other entity controlling,
     controlled by or under common control with an entity. For such purpose
     "control" shall mean the ownership, directly or indirectly, of 50% or more
     of the voting stock of a corporate entity, or of 50% or more of the
     beneficial interest of an entity other than a corporation.
<PAGE>

1.2  "LICENSEE" shall mean control Deliver Systems, Inc., a Delaware
     corporation, and any subsidiary of Control Delivery Systems Inc.

1.3  "Subsidiary" shall mean any corporation, company or other entity more than
     fifty percent (50%) of whose voting stock is owned or controlled directly
     or indirectly by Control Delivery Systems, Inc.

1.4  "Patent Rights" shall mean United States Patent Application Serial Number
     07/658,695 and any corresponding Foreign Patent Applications and any
     continuations, continuations-in-part, divisions, reissues or extensions of
     the foregoing and any patents issuing from any of the foregoing.

1.5  "Licensed Product(s)" shall mean a sustained release drug delivery system
     the manufacture, use or sale of which would, in the absence of a license,
     infringe a claim contained in the Patent Rights.

1.6  "Licensed Process(es)" shall mean the process or processes of using a
     Licensed Product which use would, in the absence of a license, infringe a
     claim contained in the Patent Rights.

Article 2 - Grant
-----------------

2.1  UKRF hereby grants to LICENSEE an exclusive worldwide right and license to
     make, have made, use, lease and sell the Licensed Product(s) or Licensed
     Process(es) under the Patent Rights to the full end of the tern or terms
     for which the Patent Rights are granted unless sooner terminated as
     hereinafter provided.

2.2  In order to establish a period of exclusivity for LICENSEE, UKRF hereby
     agrees that it shall not grant any other license to make, have made, use,
     lease and sell the Licensed Product(s) and/or Licensed Process(es) during
     the period of time commencing with the Effective Date of this Agreement and
     terminating with the full end of the tern or terms for which the Patent
     Rights are issued, unless sooner terminated as hereinafter provided.

2.3  LICENSEE shall have the right to sublicense worldwide any of the rights,
     privileges and license granted hereunder.

                                       2
<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.

2.4  LICENSEE agrees that any sublicenses granted by it shall be subject to the
     terms and conditions of this Agreement.  LICENSEE further agrees to attach
     copies of this Agreement to all sublicense agreements.

2.5  LICENSEE agrees to forward to UKRF a copy of any and all fully executed
     sublicense agreements, and further agrees to forward to UKRF annually a
     copy of such reports received by LICENSEE from its sublicensees during the
     preceding twelve (12) month period under the sublicenses as shall be
     pertinent to a royalty accounting under said sublicense agreements.

Article 3 - Due Diligence
-------------------------

     LICENSEE shall use its best efforts, to the extent commercially reasonable,
to exploit commercially the Licensed Product(s) and/or Licensed Process(es).
LICENSEE shall not be deemed to have violated the requirement of this Article 3
by sublicensing or assigning this License or any rights thereunder to one or
more sublicensees or assignees to exploit the Patent Rights.

Article 4 - Royalties
---------------------

4.1  For the rights, privileges and license granted hereunder, LICENSEE shall
     pay to UKRF in the manner hereinafter provided to the end of the term of
     the Patent Rights or until this Agreement shall be terminated as
     hereinafter provided:

     (a)  A license issue fee of $5,000.00 Dollars, which said license issue fee
          shall be deemed earned and due immediately upon the execution of this
          Agreement, and receipt of which is hereby acknowledged.

     (b)  A royalty in an amount of [*] of the Net Sales Price of
          the Licensed Product(s) or Licensed Process(es) used, leased or sold
          by or for LICENSEE or its sublicensees in the United States.

     (c)  A royalty in an amount of [*] of the Net Sales Price of
          the Licensed Product(s) or Licensed Process(es) used, leased or sold
          by or for LICENSEE or its sublicensees outside of the United States.

4.2  As used herein, the phrase "Net Sales Price" shall mean the amount invoiced
     for sale, lease and other disposition of the Licensed Product(s) or
     Licensed Process(es) by Licensee or its sublicensees (but not amounts
     invoiced to Affiliates of LICENSEE or its sublicensees) less the sum of the
     following (to the extent not already reflected in the amount invoiced):

                                       3
<PAGE>

     (a)  Discounts, uncollectible debt and wholesale chargebacks allowed and
          taken in amounts customary in the trade;

     (b)  Import, export, excise, sales or use taxes, tariffs or duties directly
          imposed and with reference to particular sales;

     (c)  Outbound transportation prepaid or allowed;

     (d)  Amounts allowed or credited on returns or retroactive price
          reductions; and

     (e)  Royalties; fees or cost of drug acquisition paid to holders of
          licenses or patents for drugs used in connection with the Licensed
          Product or Licensed Process(es).

     No deductions shall be made for commissions paid to individuals, whether
     they be with independent sales agencies or regularly employed by LICENSEE
     or its sublicensees and on its or their payroll, or for cost of
     collections. Licensed Product(s) or Licensed Process(es) shall be
     considered "sold" only when billed out or invoiced to a third party and not
     to Affiliates of LICENSEE or its sublicensees.

4.3  No multiple royalties shall be payable because the Licensed Product(s) or
     Licensed Process(es), its manufacture, lease or sale are or shall be
     covered by more than one patent application or patent licensed under this
     Agreement, and no additional royalty shall be payable as to a Licensed
     Process to the extent such process is performed using units of Licensed
     Product for which a royalty is paid.

4.4  Royalty payments shall be paid in United States dollars in Lexington,
     Kentucky, or at such other place as UKRF may reasonably designate
     consistent with the laws and regulations controlling in any foreign
     country. If the law or regulation of any country shall at any time operate
     to prohibit the transfer of funds therefrom to UKRF, LICENSEE shall notify
     UKRF to such effect and shall have the right to pay or cause to be paid
     royalties hereunder on account of its sales and the sales of its Affiliates

                                       4
<PAGE>

     and sublicensees in such country by depositing local currency, if LICENSEE
     or its sublicensee were paid in local currency, to the account of UKRF in
     an interest-bearing account at the prevailing commercial interest rate in a
     bank in such country (which account and bank are reasonably acceptable to
     UKRF). LICENSEE shall thereafter cooperate with UKRF in UKRF's efforts to
     obtain the lawful release of said funds to UKRF, but shall have no further
     responsibility therefor.

     Any withholding taxes which LICENSEE or any sublicensee shall be required
     by law to withhold on remittance of the royalty payments shall be deducted
     from such royalties paid to UKRF. LICENSEE shall furnish UKRF proof of
     payment of such taxes. If any currency conversion shall be required in
     connection with the payment of royalties hereunder, such conversion shall
     be made by using the average monthly conversion rate for the currency
     computed based on the conversion rates for such currency published in the
     Wall Street Journal for the last month of the accounting period to which
     such royalty payments relate.

4.5  If at any tine during the term of this Agreement, one or more competitors
     introduce in any country a product that competes with a Licensed Product
     and uses a control delivery system substantially similar to that used in
     the Licensed Products, seen the parties shall promptly negotiate an
     equitable adjustment to the royalty rate on Net Sales of such Licensed
     Product in that country. In determining the appropriate royalty adjustment
     under this Section 4.5, the parties shall take into account the extent to
     which royalties have been adjusted as to the same Licensed Product in the
     same country pursuant to the provisions of Section 8.9.

Article 5 - Records and Reports
-------------------------------

5.1  LICENSEE shall keep full, true and accurate books of account containing all
     particulars that may be necessary for the purpose of showing the amount
     payable to UKRF by way of royalty as aforesaid. Said books of account shall
     be kept at LICENSEE's principal place of business or the principal place of
     business of the appropriate Division of LICENSEE to which this Agreement
     relates. Said books and the supporting date shall be open upon reasonable
     advance notice, for five years following the end of the calendar year to
     which they pertain, to the inspection of the UKRF Internal Audit Division
     and/or an independent certified public accountant retained by UKRF and/or a
     certified public accountant employed by UKRF, for the purpose of verifying

                                       5
<PAGE>

     LICENSEE's royalty statement or compliance in other respects with this
     Agreement, provided that such audits shall not be conducted more frequently
     than annually and shall be conducted in a manner that does not unreasonably
     interfere with LICENSEE's business. Those auditing shall agree to hold the
     information confidential consistent with applicable law.

5.2  During the terms of this Agreement and for so long thereafter as is
     required to report royalties payable hereunder, LICENSEE or its
     sublicensees shall deliver to UKRF within 60 days after March 31, June 30,
     September 30, and December 31 of each year a report, showing total billings
     for each Licensed Product, deductions from Net Sales, total royalties due
     and any credits permissible pursuant to this Agreement. Simultaneously with
     the delivery of each such report, LICENSEE shall pay or cause to be paid to
     UKRF the royalty payments due under this Agreement for the period covered
     by such report. If no royalties are due, it shall be so reported.

Article 6 - Patent Rights and Prosecution
-----------------------------------------

6.1  UKRF shall maintain during the term of this Agreement the United States
     Patent Rights as set forth herein. The prosecution and maintenance of all
     United States Patent Rights and Applications shall be the primary
     responsibility of UKRF; provided, however, LICENSEE shall have reasonable
     opportunities to advise UKRF and shall cooperate with UKRF in such
     prosecution and/or maintenance, and provided further that LICENSEE, or any
     sublicensee may, but shall not be obligated to, prosecute and maintain the
     United States Patent Rights and applications with the consent of UKRF,
     provided that the costs of any such prosecution and maintenance may be
     deducted by LICENSEE from royalties due hereunder.

6.2  Payment of all fees and costs relating to the prosecution and maintenance
     of the existing United States Patent Rights set forth herein or additional
     domestic filings under the Patent Rights shall be responsibility of UKRF.

6.3  LICENSEE shall have the right, at LICENSEE's expense, to select countries
     for the filing, soliciting and prosecution of foreign patent applications
     relating to the Patent Rights. Such foreign patent applications shall be
     filed in the name of UKRF and patent ownership shall remain with UKRF.

                                       6
<PAGE>

6.4  UKRF shall at all times during the life of Patent Rights provide LICENSEE
     in a timely manner with copies of all material notices and correspondence
     from governmental departments, agencies and courts pertaining to matters
     covered in such patents or patent applications, including but not limited
     to notices of tax and maintenance payments due.

6.5  In the event UKRF shall at any time while this Agreement is in effect be
     compelled by applicable law to issue licenses to other licensees for the
     Licensed Products under the Patent Rights, UKRF shall inform LICENSEE of
     the order compelling any such licenses and shall renegotiate the terms of
     this Agreement covering royalties and other payments required thereunder
     only with respect to the country or countries wherein 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 7 - Termination
-----------------------

7.1  If LICENSEE shall become bankrupt or insolvent, or shall file a petition in
     bankruptcy, or if the business of LICENSEE shall be placed in the hands of
     a receiver, assignee or trustee for the benefit of creditors, whether by
     the voluntary act of LICENSEE or otherwise, this Agreement shall
     automatically terminate.

7.2  Should LICENSEE fail in its payment to UKRF of royalties due in accordance
     with the terms of this Agreement, UKRF shall have the right to serve notice
     upon LICENSEE by certified mail at the address designated in Article 13
     hereof, of its intention to terminate this Agreement within thirty (30)
     days after receipt of said notice of termination unless LICENSEE shall pay
     to UKRF, within the thirty (30) day period, if LICENSEE shall not have paid
     all such royalties due and payable, the rights, privileges and license
     granted hereunder shall thereupon immediately terminate.

7.3  Upon any material breach of default of this Agreement by LICENSEE, other
     than those occurrences set out in Paragraphs 7.1 and 7.2 hereinabove, which
     shall always take precedence in that order over any material breach or
     default referred to in this Paragraph 7.3, UKRF shall have the right to

                                       7
<PAGE>

     terminate this Agreement and the rights, privileges and license granted
     hereunder by ninety (90) days' notice by certified mail to LICENSEE. Such
     termination shall become effective unless LICENSEE shall have cured any
     such breach or default prior to the expiration of the ninety (90) day
     period from receipt of UKRF's notice of termination.

7.4  LICENSEE shall have the right to terminate this Agreement at any time on
     three (3) months' notice by certified mail to UKRF.

7.5  UKRF shall also deliver any notices hereunder to any sublicensee to whom
     LICENSEE notifies UKRF to deliver such notices.

7.6  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. LICENSEE and/or any sublicensee
     thereof may, however, after the effective date of such termination, sell
     all Licensed Products, and complete Licensed Products in the process of
     manufacture at the time of such termination and sell the same, provided
     that LICENSEE shall pay to UKRF the royalties thereon and shall submit the
     reports on the sales of Licensed Products as required by Article 5 hereof.

Article 8 - Infringement
------------------------

8.1  LICENSEE and UKRF shall promptly inform the other in writing of any alleged
     infringement of which it shall have notice by a third party of any patents
     within the Patent Rights and provide such other with any available
     information relating to such alleged infringement.

8.2  During the term of this Agreement, UKRF shall have the right, but shall not
     be obligated, to prosecute at its own expense any such infringement of the
     Patent Rights and, in the furtherance of such right, LICENSEE hereby agrees
     that UKRF may join LICENSEE as a party plaintiff in any such suit, without
     expense to LICENSEE. The total cost of any such infringement action
     commenced or defended solely by UKRF shall be borne by UKRF, and UKRF shall
     keep any recovery or damages for past infringement derived therefrom.

8.3  If within l20 days after having been notified of any alleged infringement,
     UKRF shall have been unsuccessful in persuading the alleged infringer to
     desist from the infringing activities and shall not have brought and shall

                                       8
<PAGE>

     not be diligently prosecuting an infringement action, or if UKRF shall
     notify LICENSEE at any time prior thereto of its intention not to bring
     suit against the alleged infringer, then, and in those events only,
     LICENSEE shall have the right, but shall not be obligated, to prosecute at
     its own expense such infringement of the Patent Rights, and LICENSEE may,
     for such purposes, use the name of UKRF as party plaintiff.

8.4  In the event that LICENSEE shall undertake the enforcement and/or defense
     of the Patent Rights by litigation, LICENSEE may withhold up to fifty
     percent (50%) of the royalties otherwise due UKRF hereunder and apply the
     same toward reimbursement of its expenses, including reasonable attorneys'
     fees, in connection therewith. Any recovery of damages by LICENSEE for any
     such suit shall be applied first in satisfaction of any un-reimbursed
     expenses and legal fees of LICENSEE relating to the suit, and next toward
     reimbursement of UKRF for any royalties past due or withheld and applied
     pursuant to this Article 8. The balance remaining from any such recovery
     shall be retained by LICENSEE and shall constitute Net Sales hereunder.

8.5  In the event that a declaratory judgment action alleging invalidity or non-
     infringement of any of the Patent Rights shall be brought against LICENSEE,
     UKRF, at its option, shall have the right, within thirty (30) days after
     commencement of such action, to intervene and take over the sole defense of
     the action at its own expense.

8.6  In any infringement suit either party may institute to enforce the Patent
     Rights pursuant to this Agreement, the other party hereto shall, at the
     request and expense of the party initiating such suit, cooperate in all
     respects and, to the extent reasonable, have its employees testify when
     requested and make available relevant records, papers, information,
     samples, specimens, and the like, and the party maintaining the litigation
     shall reimburse the other party against any order for costs that may be
     made against such other party in such proceedings. Should UKRF or Licensee
     commence a suit under the foregoing provisions and thereafter elect to
     abandon the same, the abandoning party shall give timely, written notice to
     the other party, which, at its option, may chose to continue the
     prosecution of such suit, with the expenses and recovery being allocated as
     provided in Section 8.2, 8.3 or 8.4 hereof.

                                       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.

8.7  LICENSEE, during the exclusive period of this Agreement, shall have the
     sole right in accordance with the terms and conditions herein to sublicense
     any alleged infringer under the Patent Rights for future infringements.

8.8  In any patent litigation pursuant to this Article 8, the party maintaining
     the litigation shall consult with the other party on material aspects of
     the litigation and shall select counsel to which the other party has no
     reasonable objection. No settlement, consent judgment or other voluntary
     final disposition of any such litigation may be entered into without the
     consent of the other party, which consent shall not unreasonably be
     withheld or delayed.

8.9  If, during the term of this Agreement, any third party (other than an
     Affiliate of a party) claims that LICENSEE'S making, using or selling of
     Licensed Products hereunder infringes on a third-party patent based upon
     claims that dominate claims in the Licensed Patent Rights, within 120 days
     after notice by LICENSEE, UKRF shall either (i) procure for LICENSEE the
     rights to exercise all rights licensed under this Agreement without any
     additional payment therefor by LICENSEE, or (ii) advise LICENSEE that it
     elects not to procure such rights itself. If UKRF does not procure such
     rights within such 120-day period after notice of such claim by LICENSEE,
     LICENSEE shall have the right, but not the obligation, to procure such
     rights itself and offset one-half of any royalty payments hereunder by the
     amount paid by LICENSEE for such third-party rights, provided that the
     offset under this provision shall not be used to reduce the royalty payment
     in any period by more than [*] of Net Sales, and any amount remaining to be
     offset from any period shall be carried forward until offset against
     royalties for future periods.

Article 9 - Product Liability
-----------------------------

9.1  LICENSEE shall at all times during the term of this Agreement and
     thereafter, indemnify, defend anti hold UKRF and/or the University of
     Kentucky, its trustees, officers, employees and Affiliates, harmless
     against all claims and expenses, including legal expenses and reasonable
     attorneys' fees, arising out of the death of or injury to any person or
     persons or out of any damage to property resulting from the production,
     manufacture, sale, use, consumption or advertisement of the Licensed
     Product(s) and/or Licensed Process(es) or arising from any obligation of
     LICENSEE hereunder, except to the extent such loss results from the
     negligence or nonperformance by UKRF of its contractual obligations
     hereunder.

                                       10
<PAGE>

9.2  If LICENSEE produces, manufactures or sells any Licensed Product (s) or
     Licensed Process(es), it shall provide UKRF upon request evidence of
     reasonable product liability insurance covering liabilities from the
     manufacture, sale and use of the Licensed Product(s) or Licensed
     Process(es).

9.3  If LICENSEE sublicenses any of the rights, privileges and licenses granted
     hereunder, LICENSEE shall require the sublicensee to provide evidence of
     such product liability insurance, upon request.

Article 10 - Assignment
-----------------------

     LICENSEE bay assign or otherwise transfer this Agreement and the license
granted hereby and the rights acquired by it hereunder.  LICENSEE shall give
UKRF thirty (30) days prior notice of such assignment and transfer and if UKRF
raises no reasonable objection to such assignment or transfer, in writing within
thirty (30) days after the giving of such notice and stating the reasons for
such objection, then UKRF shall be deemed to have approved such assignment or
transfer; provided, however, UKRF shall not be deemed to have approved such
assignment and transfer unless such assignee or transferee shall have agreed in
writing to be bound by the terms and conditions of this Agreement.  Upon such
assignment or transfer and agreement by such assignee or transferee, the term
LICENSEE as used herein shall mean such assignee or transferee.  If LICENSEE
shall sell or otherwise assign the license granted hereby and the transferee
shall not have agreed in writing to be bound by the terms and conditions of this
Agreement, or new terms and conditions shall not have been agreed upon within
sixty (60) days of such sale or transfer, UKRF shall have the right to terminate
this Agreement.

Article 11 - No Use of Names
----------------------------

     LICENSEE shall not use the name of the University of Kentucky nor any
adaptation thereof in any advertising, promotional or sales literature without
prior written consent obtained from UKRF in each case except that LICENSEE may
state that it is licensed by UKRF under one or more of the patents and/or
applications comprising the Patent Rights.

Article 12 - Export Controls
----------------------------

     It is understood that UKRF is subject to United States lairs and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control

                                       11
<PAGE>

Act, as amended, and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United States
export laws and regulations.  The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign countries without prior approval of such
agency.  UKRF neither represents that a license shall be required nor that, if
required, shall be issued.

Article 13 - Payments, Notices and Other Communications
-------------------------------------------------------

     Any payment, notice or other communication pursuant to this Agreement shall
be sufficiently made or given on the date of mailing if sent to such party by
certified first class mail, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other party:

In the case of UKRF:      University of Kentucky
                          Research Foundation
                          Room 207, Administration Building
                          Lexington, Kentucky 40506-0032

In the case of LICENSEE:  Control Delivery Systems, Inc.
                          2702 Whitney Avenue
                          Hamden, Connecticut 06518

Article 14 - Miscellaneous Provisions
-------------------------------------

14.1  This Agreement shall be construed, governed, interpreted and applied in
      accordance with the laws of the Commonwealth of Kentucky, U.S.A., except
      that questions affecting the construction and effect any patent shall be
      determined by the laws of the country in which the patent was granted.

14.2  The parties hereto acknowledge that this Agreement sets forth the entire
      Agreement and understanding of the parties hereto as to the subject matter
      hereof, and shall not be subject to any change or modification except by
      the execution of a written instrument subscribed to by the parties hereto.

14.3  The provisions of this Agreement are severable, and in the event that any
      provision of this Agreement shall be determined to be invalid or
      unenforceable under any controlling body of law, such invalidity or
      unenforceability shall not in any way affect the validity or
      enforceability of the remaining provisions hereof.

                                       12
<PAGE>

14.4  LICENSEE agrees to mark the Licensed Products sold in the United States
      with all applicable United States patent numbers. All Licensed Products
      shipped to or sold in other countries shall be marked in such a manner as
      to conform with the patent laws and practice of the country of manufacture
      or sale.

14.5  The failure of either party to assert a right hereunder or to insist upon
      compliance with any term or condition of this Agreement shall not
      constitute a waiver of that right or excuse a similar subsequent failure
      to perform any such term or condition by the other party.

     IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals and duly executed this License Agreement the day and year first set forth
above.

CONTROL DELIVERY SYSTEMS, INC.      University of Kentucky
                                    Research Foundation

By:  /s/ Vincent C. Manopoli        By:  /s/ L.J. Magid
     -----------------------             --------------

Title:  President            Title:  Vice President for Research
        ---------                    ----------------------------
                                     and Graduate Studies and
                                     Executive Director of UKRF

                                       13
<PAGE>

   Chiron Vision Corporation            Control Delivery Systems, Inc.
   9342 Jeroalmo Road                   2702 Whitney Avenue
   Irvine, California 92718             Hamden, Connecticut 06518

                                April 13, 1995

University of Kentucky Research Foundation
Room 207, Administration Building
Lexington, Kentucky 40506-0032

    Re:  License Agreement dated October 20, 1991, as amended August 10, 1993 by
         and between the University of Kentucky Research Foundation and Control
         Delivery Systems, Inc.

Gentlemen:

    Chiron Vision Corporation ("Chiron") is a party to a License and Development
Agreement with Control Delivery Systems, Inc. ("CDS") relating to intravitrial
implants (the "CDS License Agreement") under which Chiron has certain license
rights arising from the License Agreement between CDS and the University of
Kentucky Research Foundation ("UKRF") (the "UKRF License Agreement"). In order
to facilitate Chiron's consummation of arrangements to commercialize the
intravitrial implant, it is necessary that various rights under the UKRF License
Agreement be amended.

    In addition and in light of the foregoing, we ask that you agree with Chiron
as follows:

    1. In the event that UKRF knows of any basis to restrict or terminate the
UKRF License Agreement, it shall give immediate notice thereof to Chiron and
Chiron shall have reasonable opportunity to cure any breach by CDS of the UKRF
License Agreement.

    2. In the event that the UKRF Agreement License is to be terminated, whether
by action of UKRF or CDS, UKRF shall promptly notify Chiron and, if Chiron so
elects, UKRF shall enter into a new agreement directly with Chiron granting to
Chiron all the rights granted to CDS under the UKRF License Agreement.

    3. Notwithstanding Article 8 of the UKRF Agreement, in the event of any
alleged infringement of a Licensed Product of Chiron, Chiron shall have the
first right to prosecute such infringement, as set forth in the attached
Amendment No. 2 to the CDS License Agreement, and in the event of a declaratory
judgment action alleging invalidity or non-infringement involving any Licensed
Product of Chiron, Chiron shall have the first right to defend such action.

                                       14
<PAGE>

April 13, 1995
Page 2

    In order to evidence your agreement with paragraphs 1 - 3 above, please
execute the counterpart of this letter and return it to us.

                             Very truly yours,

                             CHIRON VISION CORPORATION

                             William Link, President

                             CONTROL DELIVERY SYSTEMS, INC.

                             By:  Paul Ashton
                                  -------------------------
                             Its: President
                                  -------------------------

Agreed to this 13th day of April 1995

UNIVERSITY OF KENTUCKY RESEARCH FOUNDATION

By:  /s/ Illegible
     ------------------------------
Its: Vice President for Research
     ------------------------------
     and Graduate Studies
     ------------------------------

                                       15<PAGE>

                                                                    Exhibit 10.5
================================================================================

                               LICENSE AGREEMENT

                                    BETWEEN

                  UNIVERSITY OF KENTUCKY RESEARCH FOUNDATION

                                      AND

                        CONTROL DELIVERY SYSTEMS, INC.

                               October 31, 1995

================================================================================
<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>                                                             <C>
ARTICLE 1 - DEFINITIONS......................................... 1

ARTICLE 2 - GRANT..............................................  3

ARTICLE 3 - CONFIDENTIALITY..................................... 3

ARTICLE 4 - REPRESENTATIONS AND WARRANTIES...................... 5

ARTICLE 5 - ROYALTIES........................................... 6

ARTICLE 6 - REPORTS AND RECORDS................................. 8

ARTICLE 7 - PATENT PROSECUTION AND ENFORCEMENT.................. 9

ARTICLE 8 - TERMINATION........................................ 11

ARTICLE 9 - INDEMNIFICATION.................................... 12

ARTICLE 10 - ASSIGNMENT........................................ 13

ARTICLE 11 - AGENCY............................................ 13

ARTICLE 12 - PAYMENTS, NOTICES AND COMMUNICATIONS.............. 13

ARTICLE 13 - MISCELLANEOUS PROVISIONS.......................... 14
</TABLE>
<PAGE>

                               LICENSE AGREEMENT

     This AGREEMENT, effective as of this 31st day of October, 1995 ("EFFECTIVE
DATE"), by and between the UNIVERSITY OF KENTUCKY RESEARCH FOUNDATION, a
corporation duly organized and existing under the laws of the Commonwealth of
Kentucky and having a principal office at 11 Administration Building, Lexington,
Kentucky (hereinafter referred to as "UKRF"), and CONTROL DELIVERY SYSTEMS,
INC., a Delaware corporation having its principal office at 2424 North Federal
Highway, Suite 362, Boca Raton, FL 33431 ("LICENSEE").

     WHEREAS, UKRF is the duly authorized agent of the University of Kentucky
for purposes of managing research support and intellectual property rights;

     WHEREAS, LICENSEE has sponsored certain research (the "Research") at the
University of Kentucky which resulted in the patent application identified on
Exhibit A hereto (the "Patent Application");

     WHEREAS, UKRF desires to have certain proprietary information conceived
and/or made in the course of performing the Research, including the Patent
Application, and any resulting patent rights, used in the public interest and is
willing to grant a license thereto on the terms set forth below; and

     WHEREAS, LICENSEE desires to obtain a license for such proprietary
information and any resulting patent rights upon the terms and conditions
hereinafter set forth.

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

                            ARTICLE 1 - DEFINITIONS

     As used herein, the following terms shall have the following meanings:

     1.1  "AFFILIATE" shall mean a corporation or other business entity
controlled by, controlling or under common control with, a party hereto.  For
this purpose, control of a corporation or other business entity shall mean
direct or indirect beneficial ownership of twenty-five percent (25%) or more of
the voting interest in, or a twenty-five percent (25%) or greater interest in
the equity of, such corporation or other business entity.

     1.2  "FIRST COMMERCIAL SALE" shall mean the initial transfer by LICENSEE,
its AFFILIATE or sublicensee, to an unrelated third party of LICENSED PRODUCTS
subject to royalties hereunder for commercial use and not for research,
development or testing purposes.
<PAGE>

     1.3  "LICENSED PRODUCTS" shall mean any product the manufacture or sale of
which, in the absence of a license, will infringe a Valid Claim in a pending
application or an issued patent in PATENT RIGHTS; or any product which makes use
of all or a portion of the TECHNOLOGY.

     1.4  "NET ROYALTIES" shall mean (a) the royalties based on NET SALES
collected by LICENSEE from its sublicensees for LICENSED PRODUCTS subject to
royalties hereunder, less the amount of any tax required to be withheld by a
government or governmental agency, and (b) any other fees received by LICENSEE
from its sublicensees in respect of the sale, or the right to sell LICENSED
PRODUCTS.  NET ROYALTIES shall not include amounts paid by a sublicensee to
LICENSEE (i) as reimbursement of expenses, (ii) that are payable in respect of
research or development or (iii) to fund research and development, or (iv) in
respect of the sale of other transfer of LICENSEE'S entire business or of that
part of LICENSEE'S business to which the license granted hereby relates.

     1.5  "NET SALES" shall mean the gross revenues collected from unrelated
third party customers by LICENSEE's sublicensees for LICENSED PRODUCTS subject
to royalties hereunder, less the amount actually allowed to such customers for
(a) any credits and allowances and adjustments granted to such customers on
account of the rejection or return of such LICENSED PRODUCTS previously sold,
(b) trade and cash discounts, rebates and distributor fees (but not sales
commissions) paid to unrelated third parties, (c) transportation, insurance and
handling charges, (d) sales, excise, turnover and similar taxes and any duties
and other governmental charges imposed upon the production, importation, use or
sale of such LICENSED PRODUCTS, (e) uncollectible debt and (f) royalties, fees
or cost of drug acquisition paid, directly or pursuant to a license, to holders
of patents for drugs used in connection with the LICENSED PRODUCTS, which shall
not exceed the average wholesale price for such drugs.  LICENSED PRODUCTS shall
be considered "sold" when billed out or invoiced to a third party.  In the event
that the LICENSED PRODUCT is sold in combination with one or more ingredients
which are not LICENSED PRODUCTS (e.g., a product combining more than one active
ingredient), Net Sales for computing royalties hereunder shall be determined by
multiplying Net Sales, as defined above, of such combination product (e.g., more
than one active ingredient) by a fraction, the numerator of which shall be
whichever is the higher of (1) the current standard list price for quantities
equal to the quantity listed or (2) the cost of manufacture, including direct
labor, materials consumed, and overhead plus one hundred percent (100%) thereof,
computed in accordance with generally accepted accounting practices
(consistently applied) of the LICENSED PRODUCT content thereof, and the
denominator shall be the total price or cost, calculated on the same basis as
the numerator, of all ingredients (including the LICENSED PRODUCT content as in
the numerator) contained in such combination product.

     1.6  "PATENT RIGHTS" shall mean (a) the United States and foreign patents
or pending United States and foreign patent applications set forth in Exhibit A
hereto and any other United States or foreign applications subsequently filed by
UKRF which arise out of the

                                       2
<PAGE>

inventions described in Exhibit A or which are based on the TECHNOLOGY; (b) any
additions, continuations, continuations-in-art, divisions, reissues or
extensions based thereon; (c) any United States or foreign patent obtained from
any of said United States or foreign patent applications; and (d) any other
proprietary rights embodied in any of said United States or foreign patents or
patent applications.

     1.7  "TECHNOLOGY" shall mean all ideas, know-how, trade secrets, data,
inventions, developments, formulas, processes, techniques, discoveries and any
other proprietary rights in and to the technology described in Exhibit B
attached hereto.

     1.8  "VALID CLAIM" shall mean a claim in a pending application for which
five years shall not have passed from the initial application date or a claim in
an issued patent that has not been declared invalid by an unappealed or an
unappealable decision of a court of competent jurisdiction.

                               ARTICLE 2 - GRANT

     2.1  Grant.  UKRF hereby grants to LICENSEE, subject to the terms herein
recited, an exclusive, nontransferable (except as provided in Article 10
herein), perpetual, royalty bearing, worldwide right and license, with the right
to grant sublicenses, to make, have made, use, sell and distribute (directly or
indirectly through third parties) LICENSED PRODUCTS and to use the TECHNOLOGY
and the PATENT RIGHTS.

     2.2  Delivery.  Promptly after the EFFECTIVE DATE and thereafter upon
reasonable notice, UKRF shall deliver to LICENSEE all data, documentation, and
other physical embodiments of the PATENT RIGHTS and TECHNOLOGY together with all
cooperation, assistance and access to data reasonably requested by LICENSEE to
effect transfer of the TECHNOLOGY.

                          ARTICLE 3 - CONFIDENTIALITY

     3.1  UKRF.  Because LICENSEE has revealed, and may in the future reveal, to
UKRF, the University of Kentucky and certain employees, professors, technicians,
consultants, visiting scientists, students, and post doctoral associates of the
University of Kentucky or UKRF (collectively the "Researchers") in the course of
this Agreement certain confidential knowledge, know-how, practices, processes,
or other information (hereinafter referred to as "CONFIDENTIAL INFORMATION"),
UKRF agrees to hold in confidence and shall require the University of Kentucky,
UKRF's other AFFILIATES, and the Researchers, their respective employees,
students and agents to hold in confidence, by using a reasonable degree of care,
any CONFIDENTIAL INFORMATION which is identified at the time of disclosure as
"CONFIDENTIAL" and, in the case of oral disclosures, is identified in writing
within 30 days as confidential, and UKRF agrees not to disclose and shall
require the University of Kentucky, UKRF's other AFFILIATES, their respective
employees, students

                                       3
<PAGE>

and agents, and the Researchers not to disclose CONFIDENTIAL INFORMATION to any
third party without the express written consent of LICENSEE. (UKRF agrees to
cooperate with LICENSEE in obtaining suitable confidentiality agreements from
persons as may be deemed necessary by LICENSEE.) This requirement shall remain
in force for a period of five (5) years following termination of this Agreement,
or until the expiration of the last expiring patent associated with the
Confidential Information, whichever shall occur later. Nothing in this paragraph
shall in any way restrict the rights of UKRF, the University of Kentucky, UKRF's
other AFFILIATES, their respective employees, students or agents, or the
Researchers to use, disclose or otherwise deal with any information which:

          (a) Can be demonstrated to have been in the public domain as of the
     effective date of this Agreement or comes into the public domain during the
     term of this Agreement through no act of the recipient; or

          (b) Can be demonstrated to have been independently known to the
     recipient prior to the receipt thereof, or made available to the recipient
     as a matter of lawful right by a third party; or

          (c) Can be demonstrated to have been rightfully received by the
     recipient after disclosure under this Agreement from a third party who did
     not require the recipient to hold it in confidence or limit its use and who
     did not acquire it, directly or indirectly, from LICENSEE under a
     continuing obligation of confidentiality; or

          (d) Shall be required for disclosure to any governmental regulatory
     agencies pursuant to approval for use; or

          (e) Is independently conceived, invented or acquired by researchers of
     the recipient who have not been personally exposed to the information
     provided to the recipient hereunder; or

          (f) Is published by a governmental agency as part of the normal patent
     filing and prosecution process.

     3.2  LICENSEE.  Because UKRF or the Researchers have revealed, and may in
the future reveal, to LICENSEE in the course of this Agreement certain
CONFIDENTIAL INFORMATION, LICENSEE agrees to hold in confidence and shall
require LICENSEE's AFFILIATES, their respective employees and agents to hold in
confidence, by using a reasonable degree of care, any CONFIDENTIAL INFORMATION
which is identified at the time of disclosure as "CONFIDENTIAL" and, in the case
of oral disclosures, is identified in writing within 30 days as confidential,
and LICENSEE agrees not to disclose and shall require LICENSEE's AFFILIATES,
their employees and agents not to disclose CONFIDENTIAL INFORMATION to any third
party without the express written consent of UKRF. (LICENSEE agrees to cooperate
with UKRF in obtaining suitable confidentiality agreements

                                       4
<PAGE>

from persons as may be deemed necessary by UKRF.) This requirement shall remain
in force for a period of five (5) years following termination of this Agreement,
or until the expiration of the last expiring patent associated with the
Confidential Information, whichever shall occur later. Nothing in this paragraph
shall in any way restrict the rights of LICENSEE, the LICENSEE's AFFILIATES,
their respective employees or agents to use, disclose or otherwise deal with any
information which:

          (a) Can be demonstrated to have been in the public domain as of the
     effective date of this Agreement or comes into the public domain during the
     term of this Agreement through no act of the recipient; or

          (b) Can be demonstrated to have been independently known to the
     recipient prior to the receipt thereof, or made available to the recipient
     as a matter of lawful right by a third party; or

          (c) Can be demonstrated to have been rightfully received by the
     recipient after disclosure under this Agreement from a third party who did
     not require the recipient to hold it in confidence or limit its use and who
     did not acquire it, directly or indirectly, from UKRF or PRINCIPAL
     INVESTIGATOR under a continuing obligation of confidentiality; or

          (d) Shall be required for disclosure to any governmental regulatory
     agencies pursuant to approval for use; or

          (e) Is independently conceived, invented or acquired by researchers of
     the recipient who have not been personally exposed to the information
     provided to the recipient hereunder;

          (f) Is published by a governmental agency as part of the normal patent
     filing and prosecution process; or

          (g)  May be disclosed to a third party pursuant to or in connection
     with a license agreement between LICENSEE and such third party and such
     disclosure is covered under a suitable confidentiality agreement.

                  ARTICLE 4 - REPRESENTATIONS AND WARRANTIES

     4.1  Ownership.  UKRF warrants that it is the owner of the PATENT RIGHTS
          ---------
and TECHNOLOGY and that any resultant patents are free of any liens,
encumbrances, restrictions and other legal or equitable claims.

     4.2  Authority. Each party represents and warrants that it has the right
          ---------
and authority to enter into this Agreement.

                                       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.

     4.3  Conflicts.
          ---------

          (A)  UKRF represents and warrants that the making of this Agreement
     does not violate any separate agreement it has with any other person or
     entity.  UKRF further represents and warrants that it has not granted any
     rights or licenses to the TECHNOLOGY or PATENT RIGHTS, or any portion
     thereof, to any party.

          (B)  LICENSEE represents and warrants that the making of this
     Agreement does not violate any separate agreement it has with any other
     person or entity.

     4.4  Exceptions.  Nothing in this Agreement shall be construed as:
          ----------

          (A) conferring rights on UKRF to use in advertising, publicity or
     otherwise the name of LICENSEE or of its employees, AFFILIATES or
     sublicensees without the prior written approval of LICENSEE, which shall
     not be unreasonably withheld; and

          (B) conferring rights on LICENSEE to use in advertising or publicity
     the names of "University of Kentucky" UKRF, their affiliates or their
     employees without the prior written approval of UKRF.

     4.5  Disclaimer.  EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY MAKES
ANY REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED.  THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

                             ARTICLE 5 - ROYALTIES

     5.1  Royalties.  Beginning with the FIRST COMMERCIAL SALE and subject to
the terms hereof, LICENSEE agrees to pay to UKRF, as consideration for the
rights granted under this Agreement:

          (A) An amount equal to [*] of NET ROYALTIES from LICENSED PRODUCTS
     developed by LICENSEE's sublicensees and sold in the United States;

          (B) An amount equal to [*] of NET ROYALTIES from LICENSED PRODUCTS
     developed by LICENSEE's sublicensees and sold outside of the United States;
     and

          (C) An amount equal to [*] of the NET SALES of LICENSED PRODUCTS sold
     directly by LICENSEE.

                                       6
<PAGE>

     For purposes of determining the royalty rate, all product dosage forms,
formulations, clinical indications and applications based on a particular
principal active ingredient or combinations thereof shall be considered a single
LICENSED PRODUCT for such purpose.

     5.2  Royalty Period.  The obligation to pay royalties under Section 5.1
          --------------
shall continue for the following periods:

          (A) With respect to sales of LICENSED PRODUCTS subject to such
     royalties, except as otherwise set forth in Section 5.7 hereof, for the
     life of such patents until the last of said patent rights covering such
     products, its use or its manufacturing expires, after which LICENSEE's
     license under Article 2 above shall become fully paid-up and royalty-free.

          (B) With respect to sales of LICENSED PRODUCTS subject to such
     royalties which make use of all or a portion of the TECHNOLOGY which are
     not covered by PATENT RIGHTS, for a period of five (5) years from the date
     of first sale of such LICENSED PRODUCT, after which time LICENSEE's license
     under Article 2 above shall become fully paid-up and royalty free.
     Notwithstanding the foregoing, in the event that the TECHNOLOGY used in a
     LICENSED PRODUCT comes into the public domain through no act of LICENSEE,
     LICENSEE's license under Article 2 above shall become fully paid-up and
     royalty free.

     5.3  Payments.  Royalties will be due and payable with each report
submitted in accordance with Section 6.2.  Royalty payments shall be made in
United States dollars in Lexington, Kentucky or at such other place as UKRF may
reasonably designate; provided, however, that if the laws and regulations
controlling in any foreign country prevent a royalty payment to be made in
Lexington, Kentucky, or at UKRF's designated place or prevent a royalty payment
in United States dollars, UKRF agrees to accept such royalty in the form and
place as permitted, including deposits by LICENSEE in the applicable foreign
currency in a local bank or banks designated by UKRF.  If any currency
conversion is required in connection with the payment of royalties hereunder,
such conversion shall be made by using the exchange rate prevailing at a first-
class foreign exchange bank on the last business day of the calendar biannual
reporting period to which such royalty payments relate.  If laws or regulations
require the withholding of income taxes owed by UKRF on account of royalties
accruing under this Agreement, such taxes shall be deducted on a country-by-
country basis by LICENSEE from such remittable royalty and will be paid by it to
the proper taxing authority. Proof of payment shall be secured and sent to UKRF
as evidence of such payment.

     5.4  Multiple Royalties.  No multiple royalties shall be payable because
LICENSED PRODUCTS, their manufacture, use or sale shall be covered by more than
one patent application or patent licensed under this Agreement.  In the event
that a LICENSED PRODUCT'S manufacture, use or sale shall be covered by one or
more patent application or patent licensed under this Agreement and by one or
more patent application or patent license

                                       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.

under any other agreement between LICENSEE and UKRF or the University of
Kentucky, (together with this Agreement, the "Multiple License Agreements"),
LICENSEE shall pay the highest of the agreed upon royalty rate applicable for
such LICENSED PRODUCT under any of the Multiple License Agreements plus [*] of
the second highest agreed upon royalty rate under any of the other Multiple
License Agreements.

     In the event that a LICENSED PRODUCT's manufacture, use or sale shall be
covered by one or more patent application or patent licensed under this
Agreement and by one or more patent application or patent licensed under any
other agreement between LICENSEE and one or more third parties (not including
UKRF or University of Kentucky), then LICENSEE and UKRF shall negotiate in good
faith to determine the applicable royalty rate payable to UKRF for such LICENSED
PRODUCT hereunder.

     5.5  Competing Products.  If at any time during the term of this Agreement,
one or more competitors introduce in any country a product that competes with a
LICENSED PRODUCT, then the parties in good faith shall promptly review the facts
and circumstances, and if appropriate, negotiate an equitable adjustment to the
royalty rate on NET SALES of such LICENSED PRODUCT in that country.

     5.6 Invalid Patent.  In the event that no patent covering the LICENSED
PRODUCT shall have been issued in a given country within five (5) years from the
date of the initial patent application covering the LICENSED PRODUCT in such
country, no royalty shall be owed upon the sale of the LICENSED PRODUCT in such
country and sold for use in such country after said five (5) years.  In the
event that the only patent or patents covering the LICENSED PRODUCT in a given
country are declared invalid by an unappealed or unappealable decision of a
court of competent jurisdiction, the royalty payments thereafter due under this
Agreement by virtue of the sale of the LICENSED PRODUCT in said country shall be
at one-half the full rate which would otherwise be applicable under this
Agreement, and shall be due only until the period of royalty payments in said
country, prior to and after such adjustments, totals five (5) years.  If there
are two or more conflicting judgments in courts of competent jurisdiction of
equal dignity with respect to the same patent, the decision more favorable to
the patent shall be followed until a less favorable decision has been followed
by the judgment of another court of competent jurisdiction and of higher
dignity.

                        ARTICLE 6 - REPORTS AND RECORDS

     6.1  Records.  LICENSEE and its sublicensees shall keep complete and
accurate books of account containing all particulars which may be reasonably
necessary for the purpose of showing the royalties payable to UKRF.  Said books
of account shall be kept at LICENSEE's principal place of business or the
principal place of business of a division of LICENSEE which is marketing
LICENSED PRODUCTS.  Said books and particulars shall be available during normal
business hours, upon reasonable notice, for two (2) years following the end of
the calendar year to which they pertain, to the inspection of an independent
certified

                                       8
<PAGE>

public accountant retained by UKRF for the purpose of verifying LICENSEE royalty
statements. Inspection shall be limited solely to those matters directly related
to LICENSEE royalty obligations under this Agreement and shall be allowed no
more than once a year.

     6.2  Delivery.  Within thirty (30) days after June 30 and December 31 of
each year, LICENSEE shall deliver to UKRF true and accurate reports, giving such
particulars of the business conducted by LICENSEE during the preceding six (6)
month period under this Agreement as are pertinent to a royalty accounting under
this Agreement.  These reports shall include at least the following:

          (A)  Total billings for LICENSED PRODUCTS sold;

          (B)  Deductions applicable;

          (C)  Total royalties due; and

          (D)  Name(s) and address(es) of all sublicensees.

     6.3  Audit Costs.  If an audit conducted on behalf of UKRF pursuant to
Section 7.1 reveals that LICENSEE has made an error of ten percent (10%) or more
in its favor in the aggregate payment due UKRF in any fiscal year of LICENSEE,
LICENSEE shall be obligated to pay the audit fee in connection with the audit.

     6.4  Marking.  LICENSEE and its sublicensees agree to mark all LICENSED
PRODUCTS sold in the United States with all applicable U.S. patent numbers.  All
LICENSED PRODUCTS shipped to 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 or in which such products are sold.

                ARTICLE 7 - PATENT PROSECUTION AND ENFORCEMENT

     7.1  U.S. Applications.  LICENSEE hereby authorizes UKRF, in the name of
UKRF or its employees, at UKRF's expense, to apply for and seek prompt issuance
of, and upon issuance, maintain during the term of this Agreement U.S. patent
applications and patents as described in the PATENT RIGHTS or as may otherwise
apply to the TECHNOLOGY.  UKRF shall apply all reasonable efforts to retain
broad patent claims as are reasonable and practical taking into consideration
the need and likelihood of patent issuance and enforceability. LICENSEE shall
take all actions necessary to cooperate with and assist UKRF in the filing and
prosecution of such patent applications including but not limited to appropriate
invention disclosures and execution of documents as requested by UKRF's patent
counsel.  UKRF shall keep LICENSEE informed as to the status of such patent
applications including providing LICENSEE with copies of all written
communications with the patent offices, and consulting with LICENSEE on
responses to the patent offices in advance of

                                       9
<PAGE>

submission. If UKRF fails to diligently pursue any of such patent applications
and, within sixty (60) days of LICENSEE's written request, fails to take such
actions set forth in such request respecting the prosecution of any of such
patent applications or if UKRF abandons any such patent application, LICENSEE
shall have the right, at its expense, to take such actions as are necessary to
pursue such patent applications, and LICENSEE shall have the right to offset
against payments due to UKRF hereunder until the expenses incurred by LICENSEE
to pursue such patent application have been recouped.

     7.2  Foreign Applications.  UKRF hereby authorizes LICENSEE, in the name of
UKRF or its employees, at LICENSEE's expense, to apply for and seek prompt
issuance of, and upon issuance, maintain during the term of this Agreement
foreign patent applications and patents as described in the PATENT RIGHTS or as
may otherwise apply to the TECHNOLOGY.  LICENSEE shall apply all reasonable
efforts to retain broad patent claims as are reasonable and practical taking
into consideration the need and likelihood of patent issuance and
enforceability.  UKRF shall take all actions necessary to cooperate with and
assist LICENSEE in the filing and prosecution of such patent applications
including but not limited to appropriate invention disclosures and execution of
documents as requested by LICENSEE's patent counsel.  LICENSEE shall keep UKRF
informed as to the status of such patent applications including providing UKRF
with copies of all written communications with the patent offices, and
consulting with UKRF on responses to the patent offices in advance of
submission.  If LICENSEE fails to diligently pursue any of such patent
applications and, within sixty (60) days of UKRF's written request, which shall
include submission to LICENSEE of an invention disclosure suitable for
implementing the action specified in the request, fails to take such actions set
forth in such request respecting the prosecution of any of such patent
applications or if LICENSEE abandons any such patent application, UKRF shall
have the right, at its expense, to take such actions as are necessary to pursue
such patent applications.  UKRF shall execute such documents as are reasonably
necessary to file with the Patent and Trademark Office notice of LICENSEE's
exclusive license under the PATENTS RIGHTS.

     7.3  Enforcement.  UKRF and LICENSEE shall each give immediate notice to
the other of any infringement of PATENT RIGHTS by third parties which may come
to their attention.  UKRF hereby grants to LICENSEE, at LICENSEE's expense, the
right to institute and conduct such legal action against third party infringers
of the PATENT RIGHTS and/or unauthorized users of the TECHNOLOGY, or enter into
such settlement agreements, as are deemed appropriate by LICENSEE.  LICENSEE
shall control the conduct of such litigation, including the choice of its
counsel.  LICENSEE shall receive the full benefits of any action it takes
pursuant to this Section 7.3.  In any such action, UKRF shall be entitled to
join LICENSEE as a party plaintiff and UKRF will be obligated to reasonably
assist at LICENSEE's expense.  In the event that such third party infringer or
such unauthorized user files a counterclaim or threatens to file a counterclaim
against  LICENSEE, LICENSEE hereby agrees to indemnify UKRF against all losses,
liabilities, claims, costs, charges and expenses incurred or suffered by UKRF in
connection with such counterclaim or threat to the

                                       10
<PAGE>

extent that any such losses, liabilities, claims, costs, charges and expenses
arise because of LICENSEE'S gross negligence, bad faith or wilful misconduct;
provided, however, that LICENSEE shall not be obligated to indemnify UKRF to the
extent that any such losses, liabilities, claims, costs, charges and expenses
arise because of the alleged infringement of the rights of such third party by
reason of practice by LICENSEE, its AFFILIATES or sublicensees of the license
granted herein (the parties agree that such alleged infringement and any
indemnification relating thereto shall be covered by Section 7.4). Should
LICENSEE fail to commence actions or proceedings against infringers of the
PATENTS or unauthorized users of the TECHNOLOGY within ninety (90) days of
receiving written notice thereof from UKRF, UKRF, at UKRF's expense, shall have
the right to initiate and pursue such action and receive all resulting benefits.

     7.4  Infringement.  Subject to Section 5.6 hereof, in the event that a
claim or action for infringement of the rights of others is made or brought
against LICENSEE, its AFFILIATES or sublicensees during the term of this
Agreement, by reason of practice in such country by LICENSEE, its AFFILIATES or
sublicensees of the license granted herein, LICENSEE shall control the conduct
of such litigation, including the choice of its legal counsel, and shall pay all
costs and expenses, including attorneys fees, associated therewith. LICENSEE may
recover such costs and expenses and any judgment assessed against, or settlement
agreed upon by, LICENSEE by set-off against fifty percent (50%) of the amounts
payable to UKRF hereunder in any payment period.   Any amount remaining to be
offset from any period shall be carried forward until offset against royalties
for future periods.

                            ARTICLE 8 - TERMINATION

     8.1  Bankruptcy.  If LICENSEE undergoes a liquidation in bankruptcy, or
files a petition for liquidation in bankruptcy, or if the business of LICENSEE
shall be placed in the hands of a receiver, trustee or assignee for the benefit
of creditors, whether by the voluntary act of LICENSEE or otherwise, and if
LICENSEE fails to terminate any such proceeding within one hundred twenty (120)
days after its commencement, UKRF may at its election terminate this Agreement
upon thirty (30) days written notice to LICENSEE.  LICENSEE agrees to provide
written notice to UKRF of LICENSEE or a third party's intention to file a
petition for liquidation of LICENSEE in bankruptcy prior to such filing, if
known.

     8.2  Failure to Pay Royalties.  Should LICENSEE fail in its payment to UKRF
of royalties due in accordance with the terms of this Agreement, UKRF shall have
the right to serve notice upon LICENSEE by certified mail at an address
designated in Article 12 hereof, of its intention to terminate this Agreement
within ninety (90) days after receipt of said notice of termination unless
LICENSEE shall pay UKRF within the ninety (90) day period.  If such ninety (90)
day period expires and if the amount of royalties due is not paid by LICENSEE,
the rights, privileges and license granted hereunder shall terminate upon the
end of such ninety (90) day period.

                                       11
<PAGE>

     8.3  Material Breach.  Upon any other material breach or default by
LICENSEE or the failure of LICENSEE to pay the amounts set forth in Exhibit A to
the Research Agreement, UKRF shall have the right to terminate this Agreement
and the rights and license granted hereunder by ninety (90) days' notice by
certified mail to LICENSEE.  Such termination shall become effective at the end
of such ninety (90) day period unless LICENSEE has cured any such breach or
default prior to the expiration of the ninety (90) day period.

     8.4  Termination by LICENSEE.  LICENSEE may terminate this Agreement upon
one hundred twenty (120) days' notice by certified mail to UKRF.

     8.5  Obligations on Termination:  Upon termination of this Agreement for
any reason, nothing herein shall be construed to release either party of any
obligation which matured prior to the effective date of such termination, and
LICENSEE may, after the effective date of such termination, complete LICENSED
PRODUCTS in the process of or manufacture at the time of such termination and
sell the same together with LICENSED PRODUCTS in inventory for a period of one
year, provided that LICENSEE pays to UKRF royalties as required by Article 5 of
this Agreement and submits the reports as required by Article 6 on the sale of
LICENSED PRODUCTS.

     8.6  Survival.  Articles 3 and 4 and Sections 7.3, 7.4, 8.5, 9.1, 9.2, 9.3
and 13.1 shall survive termination of this Agreement as well as the right of
UKRF to collect any accrued royalties as recited in Article 5.

     8.7  Sublicenses.  In the event the licenses granted to LICENSEE under
Section 2 above terminate for any reason, each of LICENSEE'S sublicenses in
effect at such time shall continue in accordance with the terms of such
sublicenses.  UKRF agrees that each such sublicensee shall be entitled to
enforce such rights and license directly against UKRF.  The foregoing shall be
subject to each such sublicensee agreeing in writing at any time prior to such
terms and conditions are to become effective that UKRF is entitled to enforce
the provisions in such sublicense directly against such sublicensee.

                          ARTICLE 9 - INDEMNIFICATION

     9.1  Indemnification by Licensee. LICENSEE shall at all times during the
term of this Agreement and thereafter, indemnify, defend and hold UKRF, its
trustees, officers, employees and affiliates, harmless against all claims and
expenses, including legal expenses and reasonable attorneys' fees, arising out
of the death of or injury to any person or persons or out of any damage to
property and against any other claim, proceeding, demand, expense and liability
of any kind whatsoever resulting from the production, manufacture, sales, use,
consumption or advertisement of the LICENSED PRODUCTS or arising from any
obligation of LICENSEE hereunder.

                                       12
<PAGE>

     9.2 Insurance.  If LICENSEE produces, manufactures or sells any LICENSED
PRODUCTS, 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.  The policy of
insurance shall contain a provision of non-cancellation except upon the
provision of thirty (30) days notice to the University.  Policy limits shall be
not less than $1,000,000 per occurrence.

     9.3 Sublicensees.  If LICENSEE sublicenses any of the rights, privileges
and licenses granted hereunder, LICENSEE shall require the sublicense to provide
UKRF evidence of such product liability insurance.

                            ARTICLE 10 - ASSIGNMENT

     UKRF may assign or transfer its rights and obligations under this Agreement
to an AFFILIATE or an AFFILIATE OF THE University of Kentucky; LICENSEE may
assign or otherwise transfer this Agreement and the license granted hereby and
the rights acquired by it hereunder only if such assignment or transfer is
accompanied by a sale or other transfer of LICENSEE's entire business or of that
part of LICENSEE's business to which the license granted hereby relates;
provided, that in any case any such assignee or transferee has agreed in writing
to be bound by the terms and provisions of this Agreement.  Upon such assignment
or transfer and agreement by such assignee or transferee, the term LICENSEE or
UKRF, as the case may be, as used herein shall include such assignee or
transferee.

                              ARTICLE 11 - AGENCY

     Neither party shall be deemed to be an agent of the other party as a result
of any transaction under or related to this Agreement, and shall not in any way
pledge the other party's assets or incur any obligation on behalf of the other
party.

               ARTICLE 12 - PAYMENTS, NOTICES AND COMMUNICATIONS

     Any payment, notice or other communication pursuant to this Agreement shall
be sufficiently made or given on the date of mailing if sent to such party by
certified first class mail, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other party:

     In the case of UKRF:  The University of Kentucky
                           Research Foundation
                           11 Administration Building
                           Lexington, Kentucky  40506-0032
                           Attention:  Dr. Fitzgerald Bramwell

                                       13
<PAGE>

     In the case of LICENSEE:  Control Delivery Systems, Inc.
                               2424 North Federal Highway, Suite 362
                               Boca Raton, FL  33431
                               Attention:  President

                     ARTICLE 13 - MISCELLANEOUS PROVISIONS

     13.1  Limitation of Liability.  Neither party shall be liable to the other
for any special, consequential, incidental or indirect damages arising out of
this agreement, however caused, under any theory of liability.

     13.2  Governing Law.  This Agreement shall be construed, governed,
interpreted and applied in accordance with the laws of the Commonwealth of
Kentucky, except that questions affecting the construction and effect of any
patent shall be determined by the law of the country in which the patent was
granted.  The parties hereto further agree that any and all proceedings relating
to the subject matter hereof may be maintained in the State and Federal Courts
of the Commonwealth of Kentucky, which courts shall have non-exclusive
jurisdiction for such purpose.

     13.3  Confidentiality of Agreement.  Each party agrees that the terms and
conditions of this Agreement shall be treated as confidential information except
as required by or for the University of Kentucky's standard funding disclosure
policies, applicable disclosure laws, financing sources, enforcement of the
Agreement, mergers and acquisitions, or as otherwise mutually agreed by the
parties.

     13.4  Entire Agreement. The parties hereto acknowledge that this instrument
sets forth the entire agreement and understanding of the parties hereto as to
the subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument subscribed to by
the parties hereto.

     13.5  Severability.  The provisions of this Agreement are severable, and in
the event that any provisions of this Agreement are determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
enforceability shall not in any way affect the validity or enforceability of the
remaining provisions hereof.

                                       14
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and
seals and duly executed this Agreement as of the day and year first above
written.

UNIVERSITY OF KENTUCKY                CONTROL DELIVERY SYSTEMS, INC.
  RESEARCH FOUNDATION

By /s/ Fitzgerald Bramwell            By /s/ Paul Ashton
   --------------------------            ---------------------------

Name Fitzgerald Bramwell              Name Paul Ashton
     ------------------------              -------------------------

Title Vice President for Research     Title President
      ---------------------------           ----------------------------
      and Graduate Studies
      ---------------------------

                                       15
<PAGE>

                                   Exhibit A

                                 PATENT RIGHTS

United States Patent Serial No. 08/187,462

Title:  Co-drugs as a Method of Controlled Delivery;
        -------------------------------------------

Author: Paul Ashton, et al;
                      -- --

and all foreign counterparts.

                                       16
<PAGE>

                                  Exhibit B

                                  TECHNOLOGY

     (i)    All materials and methods used or useful in the development and
manufacture of all the compounds listed in the U.S. patent described in Exhibit
A hereto (the "Compounds"),

     (ii)  all published and unpublished materials, including but not limited
to, research data, human clinical data, other test results and know-how,
relating to the Compounds,

     (iii) all reference spectra relating to the Compounds,

     (iv)  all production procedures of spectra relating to the Compounds,

     (v)   all molding device designs relating to the Compounds,

     (vi)  all manufacturing scale up know-how relating to the Compound, and

     (vii) all samples of the Compounds.

                                       17

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