Document:

Exhibit 10.8

	

EXHIBIT 10.8

RIVERCHASE BUSINESS
PARK

Warehouse Lease

     THIS
LEASE, (“Lease”), made and entered into as of this 12th day of July, 2000, by and between
Landlord and Tenant as specified in Items 1 and 2 of the Definitions appearing in Section
1.1 hereof. 

     Landlord
hereby demises and rents unto Tenant, and Tenant hereby leases from Landlord, certain
Premises now existing in Landlord’s Warehouse Center (“Center”), as described in Item 3
of the Definitions appearing in Section 1.1 hereof, and upon the terms, covenants and
conditions contained herein. 

ARTICLE 1
EXHIBITS,
PREMISES, USE OF PREMISES AND TERM

Section 1.0  Covenants
of Landlord’s Authority 

	 	     
Landlord
represents and covenants that; (a) prior to commencement of the Lease term, it will have
either good title to or a valid leasehold interest in the land and building of which the
Premises form a part; and (b) upon performing all of its obligations hereunder, Tenant
shall peacefully and quietly have, hold and enjoy the Premises for the term of this Lease.

Section 1.1 Definitions 

	 	     
The
following items shall be defined or be referred to as indicated below for the purposes of
this Lease and the Exhibits attached hereto:

		 Item 1 - Landlord:	
 RBP, LLC an Alabama Limited Liability Company
Post Office Box 187

Birmingham, Alabama 35201-0187

 
		 Item 2 - Tenant:	
BioCryst Pharmaceuticals, Inc.

                                    2190-B Parkway Lake Drive

                                    Hoover, Alabama 35244

		 Item 3 - Center:	
Riverchase Business Park

	 	
Premises
(Section 1.3): Suite #'s 2190 A, B, H, 2192 A, C, K having a gross leaseable area of
approximately 50,150 square feet

	 	
Item
4 - Use of Premises (Section 1.4): Research and development of pharmaceuticals and any
other related purpose approved by Landlord.

	 	
Item
5 - Tenant’s Trade Name: BioCryst Pharmaceuticals, Inc.

	 	
Item
6 - Lease Term (Section 1.5) 10 years and -0- months

	 	
Item
7 - Lease Commencement Date (Section 1.5): July 1, 2000
              Lease Expiration Date (Section
1.5): June 30, 2010

	 	
Item
8 - Rent Commencement Date (Section 1.6): July 1, 2000

	 	
Item
9 - Total Fixed Minimum Rent (See Addendum to Lease Exhibit D)

	 	
Item
10 - Fixed Minimum Rent Increase(s) – (See Addendum to Lease Exhibit D)
                Adjustment Dates:

                Basic Standard:

	 	
Item
11 - Security Deposit (Section 10.1): $21,400.00 (transferred from previous lease dated
January 17, 1992).

	 	
Item
12 - Tenant’s Participation in Real Estate Taxes (Section 4.2):
                Base Year - 2000

	 	
Item
13 - Common Area Maintenance (Section 1.2) (payable quarterly)

 
		 Item 14 - Notices
(Section 12.1)
Tenant:	
BioCryst Pharmaceuticals, Inc.

                                                              2190 – B Parkway Lake Drive

                                                              Hoover, Alabama 35244

 
		           Landlord’s           Agent:	
Engel Realty Company, Inc.

                                                              P. O. Box 187

                                                              Birmingham, Alabama 35201-0187

 
		           Landlord:	
RBP, LLC, an Alabama Limited Liability Company

                                                              951 Eighteenth Street South

                                                              Birmingham, Alabama 35205

	 	
NOTE:
Please send all rent payments to the Landlord’s Agent’s address. 

	 	
Item
15 - Additional Terms: None

	

Section 1.2 Common Area
Maintenance - Definitions 

     A.
COMMON AREAS 

     Landlord
shall make available within the Center such Common Areas, including but not limited to
parking areas, driveways, truckways, delivery passages, loading docks, pedestrian
sidewalks and ramps, access and egress roads, open and enclosed courts and malls,
landscaped and planted areas, public restrooms and other facilities, as Landlord in its
sole discretion shall deem appropriate. 

     Landlord
shall operate, manage, equip, light, repair and maintain said Common Areas for their
intended purposes in such manner as Landlord, in its reasonable discretion, shall
determine, and Landlord reserves the right from time to time to make reasonable changes
to the Common Areas, provided such changes do not either (i) reduce the number of parking
spaces available for Tenant’s use, or (ii) materially adversely affect access to Tenant’s
loading docks, and Landlord shall not be subject to liability therefor nor shall Tenant
be entitled to any compensation or diminution or abatement of rent, nor shall any such
action be deemed an actual or constructive eviction of Tenant. 

     B. USE
OF COMMON AREAS 

     During
the term of this Lease only, Tenant and its permitted concessionaires, officers,
employees, agents, customers and invitees shall hav the non-exclusive right, in common
with Landlord and all others to whom Landlord has or may hereafter grant rights, to use
the Common Areas as designated from time to time by Landlord, subject to such reasonable
rules and regulations as Landlord may from time to time impose in a uniform and
non-discriminatory basis, including, the designation of specific areas in which vehicles
owned by Tenant, its concessionaires, officers, employees and agents must be parked,
provided such designated parking areas are located in reasonably proximity to the
Premises. If Landlord shall designate such parking areas, and if any vehicle of Tenant or
permitted concessionaire, officer, employee or agent of Tenant is parked in any other
portion of the Center, Tenant shall pay to Landlord upon demand the sum of Ten Dollars
($10.00) for each such vehicle for each day, or part thereof, such vehicle is so parked,
and Tenant hereby authorizes Landlord to tow or cause any such vehicle to be towed from
the Center, and agrees to reimburse Landlord for the cost thereof upon demand, and to
otherwise indemnify and hold Landlord harmless with respect thereto. Tenant agrees after
notice thereof to abide by such rules and regulations and to use its best efforts to
cause Tenant’s permitted concessionaires, officers, employees, agents, customers and
invitees to conform thereto. Tenant shall, upon request, furnish to Landlord the license
numbers of the vehicles operated by Tenant and its concessionaires, officers, employees
and agents. Landlord may at any time close temporarily any Common Area to make repairs or
changes, to prevent the acquisition of public rights in such areas and to discourage
non-customer parking, and Landlord shall not be subject to liability therefor nor shall
any action be deemed an actual or constructive eviction of Tenant. Landlord may do such
other acts in and to the Common areas as in its judgment may be desirable to improve the
convenience thereof. Tenant shall not at any time interfere with the rights of Landlord
and other Tenants, its and their concessionaires, officers, employees, agents, customers,
and invitees, to use any part of the parking areas and other Common Areas. Neither Tenant
nor Tenant’s employees, concessionaires, officers or agents may solicit business in the
parking lot or other Common Areas or distribute any handbills or other advertising matter
in such areas or place any handbills or advertising matter in or on any vehicles parked
therein without Landlord’s prior written consent. 

	

     Landlord
reserves the right to grant to third persons the non-exclusive right to cross over and
use in common with Landlord and all tenants of the Center the Common Areas as designed
from time to time by Landlord. 

     C.
CHARGE FOR COMMON AREAS 

	 	
Tenant’s
pro rata share of the Common Areas costs shall be the portion of such costs which the
floor area of the Premises bears to the gross leaseable area in the Center. Tenant shall
pay to Landlord, in the manner provided below, Tenant’s pro rata share of the Common Area
maintenance costs as such terms are defined as follows: All costs and expenses paid or
incurred by Landlord, its agents or any contractor employed by Landlord directly related
to the day-to-day operation, maintenance, managing, equipping, insuring, repairing and
replacing the Common Areas. Such costs and expenses shall include but not be limited:
Maintaining lighting fixtures, including costs of light bulbs and electric current
(provided, however, that if a Tenant requires that the Center remain illuminated after 11
p.m., Tenant shall be responsible for the cost allocable to said requirement), repairing,
replacing and maintaining all fire sprinkler systems and other similar fire prevention
equipment and systems serving the Center, salaries and related costs of all on-site
personnel, repairs and maintenance, costs and expenses of planting, maintaining,
replanting and replacing flowers and other landscaping, sound systems, removal of trash,
rubbish, garbage and other refuse, cleaning, supplies, uniforms and dry cleaning thereof,
premiums for liability, fire, hazard, sign and other property related insurance, costs of
operating, maintaining and repairing truck serviceways, tunnels, loading docks, retaining
walls, pedestrian malls (open or enclosed, courts, plazas, stairs, ramps, sidewalks,
washrooms and other elements of the Common Areas, illumination and maintenance of signs
equipment depreciation, comfort and first-aid stations, parcel pick-up stations, service
contracts with independent contractors, capital expenditures required under any
governmental law, rule or regulation that was not applicable to the building at the time
it was originally constructed, and administrative and overhead costs equal to fifteen
percent (15%) of the total costs of operating and maintaining the Common Areas. With
respect to any capital improvements, the amortized cost of capital improvements (as
distinguished from replacement parts or components installed in the ordinary course of
business) made to the Center which are: (a) performed primarily to reduce operating
expense costs or otherwise improve the operating efficiency of the Center; or (b) required
to comply with any laws that are enacted, or first interpreted to apply to the Center
after the date of this Lease; or (c) replacement of light standards, fixtures and
equipment; or (d) repair or repaving of any parking areas shall be amortized by Landlord
over the lesser of the Payback Period (defined below) or 5 years. The amortized cost of
capital improvements may, at Landlord’s option, include actual or imputed interest at the
rate that Landlord would reasonably be required to pay to finance the cost of the capital
improvement. “Payback Period“means the reasonably estimated period of time that it takes
for the cost savings resulting from a capital improvement to equal the total cost of the
capital improvement. 

	 	Expenses
shall not include: the cost of capital improvements (except as set forth above);
depreciation; interest (except as provided above for the amortization of capital
improvements); principal payments of mortgage and other non-operating debts of Landlord;
the cost of repairs or other work to the extent Landlord is reimbursed by insurance or
condemnation proceeds; costs in connection with leasing space in the Building, including
brokerage commissions; lease concessions, including rental abatements and construction
allowances, granted to specific tenants; costs incurred in connection with the sale,
financing or refinancing of the Center; fines, interest and penalties incurred due to the
late payment of taxes or expenses; organizational expenses associated with the creation
and operation of the entity which constitutes Landlord; or any penalties or damages that
Landlord pays to Tenant under this Lease or to other tenants in the Center under their
respective leases. If the Center is not at least 95% occupied during any calendar year or
if Landlord is not supplying services to at least 95% of the total rentable square
footage of the Center at any time during a calendar year, expenses shall, at Landlord’s
option, be determined as if the Building had been 95% occupied and Landlord had been
supplying services to 95% of the rentable square footage of the Center during that
calendar year.

	

     D.
COMMON AREA MAINTENANCE COSTS 

     Tenant,
for each Lease Year or Partial Lease Year, during the term of this Lease or any renewal
thereof, shall pay to Landlord its proportionate share, as hereinafter defined, of the
annual Common Area Maintenance assessed or levied against the land and buildings of the
Center. Tenant’s proportionate share for said Common Area Maintenance for each Lease Year
or Partial Lease Year of the term of this Lease or any renewal thereof shall be
determined by dividing the total number of square feet in the Premises by the total
number of square feet of all leaseable building space within the Building. Any payments
due by Tenant hereunder shall be made during each Lease Year or Partial Lease Year of the
term of this Lease or any renewal thereof within Thirty (30) days after Tenant’s receipt
of Landlord’s written certification of the amount due. Tenant’s share shall be prorated
in the event Tenant is required to make such payment for a Partial Lease Year. 

     If the
Lease expires during a Partial Lease Year, Landlord shall bill Tenant, not more than
sixty (60) days prior to the expiration date of the Lease, for its estimated pro rata
share of Common Area Maintenance for the Partial Lease Year. Tenant shall remit full
payment to Landlord within fifteen (15) days after receipt of such bill. If Tenant fails
to remit such full payment to Landlord, Landlord, in its sole discretion, may deduct the
amount due from Tenant’s Security Deposit and be entitled to all other rights and
remedies hereunder for Tenant’s default. 

Section 1.3 Premises
Leased by Tenant 

     a. The
premises leased by Tenant are located at the Center set forth in Item 3 of the
Definitions, which Premises are particularly described in Item 3 of the Definitions. 

	 	
The
boundaries and location of the Premises are cross-hatched on the Site plan diagram of the
Center (Exhibit “B”), which sets forth the general layout of the Center, but shall not be
deemed to be a warranty, representation, or agreement upon the part of the Landlord that
said Center will be exactly as indicated on said diagram.

	

     The
Premises includes, for the purpose of this Lease, the Premises within Landlord’s Center
leased to Tenant herein and shall extend to the exterior faces of all walls or to the
building line where there is no wall, or to the center line of those walls separating the
Premises from other Premises in the Center, together with the appurtenances specifically
granted in this Lease, but reserving and excepting to Landlord the use of the exterior
walls and the roof and the right to install, maintain, use, repair and replace pipes,
ducts, conduits, and wires leading through the Premises in locations which will not
materially interfere with Tenant’s use thereof and serving other parts of the Center. 

Section 1.4 Use of
Premises 

     The
Premises shall be used and occupied only for the purpose as specified in Item 4 of the
Definitions and for no other purpose or purposes without Landlord’s prior written
consent. Tenant shall, at its own risk and expense, obtain all governmental licenses and
permits necessary for such use. 

Section 1.5 Lease Term 

     The
term of this Lease shall be for the period specified in Item 6 of the Definitions
commencing and expiring as provided in Item 7 of the Definitions, unless sooner
terminated or extended as hereinafter provided. 

Section 1.6 Rent
Commencement Date 

     Tenant
shall commence payment of Rent at the earlier of (a) the date specified in Item 8 of the
Definitions, or (b) the date when the Tenant shall occupy the Premises, which date shall
be agreed to by both parties in writing no later than five (5) days after Tenant opens
for business. If the Rent Commencement Date falls on a day other than the first day of a
calendar month, the Fixed Minimum Rent for such month shall be prorated on a per diem
basis, calculated on the basis of thirty (30) day month. 

	

Section 1.7 Lease Year

     For
purposes of this Lease, the term Lease Year is defined to mean a calendar year (beginning
January 1 and extending through December 31 of any given year). Any portion of a year
which is less than a Lease Year, that is, from the Lease Commencement Date through the
next December 31, and from the last January 1, falling within the term of the Lease
through the last day of the term, shall be defined as a Partial Lease Year. 

Section 1.8 Acceptance
of Premises

     Tenant
acknowledges that it has fully inspected and accepts the Premises in their present
condition and “as is”, and that the same are suitable for the use specified in Item 4 of
the Definitions. 

ARTICLE II
RENT

Section 2.1 Fixed
Minimum Rent

     The
total Fixed Minimum Rent for the Lease Term as specified in Item 9 of the Definitions
shall be payable by Tenant as specified in Item 9 of the Definitions. 

     The
phrase “Fixed Minimum Rent” shall be the Fixed Minimum Rent above specified, payable
monthly in advance on the first day of each month, without prior demand therefor and
without any deduction or setoff whatsoever. In addition, Tenant covenants and agrees to
pay Landlord all applicable sales or other taxes that may be imposed on the above
specified rents or payments hereinafter provided for to be received by Landlord when each
such payment is made. If Tenant pays any installment of Fixed Minimum Rent or any other
sum by check and such check is returned for insufficient funds or other reasons not the
fault of Landlord, then Tenant shall pay to Landlord on demand a processing fee of $25.00
per returned check. Landlord, at its option, may subtract any such processing fee from
any Security Deposit held by Landlord, and, in such event, Tenant shall deposit a like
amount with Landlord in accordance with the terms of Section 10.1. 

Section 2.2 Late Payment
Penalty

     Should
Tenant fail to pay when due any Installment of Fixed Minimum Rent or any other sum
payable to Landlord under the terms of this Lease, then Landlord shall assess a servicing
fee of Fifty Dollars ($50.00) per month from and after the Fifth (5th) day following the
date on which any sum shall be due and payable, until the required payments are made.
Landlord, at its option, may subtract any such amount that is not paid from any Security
Deposit held by Landlord and, in such event, Tenant shall deposit a like amount with
Landlord in accordance with the terms of Section 10.1 herein. Should Tenant remit a
partial payment for any outstanding Fixed Minimum Rent or Additional Rent due, Landlord
shall apply said partial payment to the outstanding Fixed Minimum Rent or Additional Rent
as Landlord deems necessary in its sole discretion. 

Section 2.3 Additional
Rent - Definition

     In
addition to the foregoing Fixed Minimum Rent and Fixed Minimum Rent Increase, all
payments to be made under this Lease by Tenant to Landlord shall be deemed to be and
shall become Additional Rent hereunder and, together with Fixed Minimum Rent, shall be
included in the term “Rent” whenever such term is used herein. Unless another time shall
be herein expressly provided for the payment thereof, any Additional Rent shall be due
and payable on demand or together with the next succeeding installment of Fixed Minimum
Rent, which ever shall first occur, together with all applicable state taxes, and
Landlord, after first giving Tenant not less than ten (10) days prior written notice and
opportunity to cure, shall have the right to pay or do any act which requires the
expenditure of any sums of money by reason of the failure or neglect of Tenant to perform
any of the provisions of this Lease, and in the event Landlord elects to pay such sums or
do such acts requiring the expenditure of monies, all such sums so paid by Landlord,
together with interest thereon, shall be deemed to be Additional Rent and payable as such
by Tenant to Landlord upon demand. 

	

ARTICLE III
UTILITY
SERVICES

Section 3.1 Utilities

     Tenant
agrees that it shall not install any equipment which will exceed or overload the capacity
of any existing utility facility and that if any equipment installed by Tenant shall
require additional utility facilities, the same shall be installed at Tenant’s expense in
accordance with plans and specifications to be approved in writing by Landlord. Tenant
shall promptly pay for all public utilities rendered or furnished to the Premises from
and after the date Tenant assumes possession of the Premises (irrespective of whether
Tenant shall have opened for business in the Premises) including but not limited to
water, gas, electricity and sewer charges and all taxes thereon. Landlord, at its
election, may install re-registering meters and collect any and all charges aforesaid
from Tenant as and when bills are rendered by Landlord, making returns to the proper
public utility company or governmental unit, provided that Tenant shall not be charged
more than the rates it would be charged for the same services if furnished direct to the
Premises by such companies or governmental units. 

Section 3.2 Furnishing
of Utility Service

     Any
utility or related service, including a privately owned sewerage disposal system, which
Landlord elects to provide or cause to be provided to the Premises, may be furnished by
any agent employed by Landlord or by an independent contractor selected by Landlord, and
Tenant shall accept the same therefrom to the exclusion of all other suppliers, provided
that Tenant shall not be charged a rate in excess of then prevailing competitive rates
for the same services if furnished direct to the Premises by public utility companies or
governmental units. The charges for such services so furnished shall be Additional Rent
due on the first day of the calendar month following rendition of a bill therefor.
Landlord may discontinue furnishing such services if the same are not so paid for, upon
not less than ten (10) days written notice to Tenant, and no such discontinuation shall
be deemed an eviction or render Landlord liable to Tenant for damages or relieve Tenant
from performance of its obligations hereunder. Interruption or impairment of any such
utility or related service, caused or necessitated by repairs or improvements, or by
hazards beyond reasonable control of Landlord, shall not give rise to a right or cause of
action by Tenant against Landlord in damages or otherwise. Landlord may cease to furnish
any one or more of such services at any time without any responsibility to Tenant except
to connect the service facilities with other comparable sources of supply for the
services so discontinued. 

ARTICLE IV
TAXES

Section 4.1 Tenant’s
Taxes

     Tenant
shall be liable for all taxes levied or assessed against personal property, furniture or
fixtures placed by Tenant in the Premises. If any such taxes for which Tenant is liable
are levied or assessed against Landlord or Landlord’s property and if Landlord elects to
pay the same or if the assessed value of Landlord’s property is increased by inclusion of
personal property, furniture or fixtures placed by Tenant in the Premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand
that part of such taxes. 

Section 4.2 Tenant’s
Participation in Real Estate Taxes

     Landlord
will pay in the first instance all real property taxes, including extraordinary and/or
special assessments (and all costs and fees incurred in contesting the same), hereinafter
collectively referred to as Real Estate Taxes, which may be levied or assessed by the
lawful tax authorities against the land, the buildings, and all other improvements in the
Center. 

	

     Tenant,
for each Lease Year or Partial Lease Year, as defined in Section 1.7, during the term of
this Lease or any renewal thereof, shall pay to Landlord its proportionate share, as
hereinafter defined, of the amount by which the annual Real Estate Taxes assessed or
levied against the land and buildings of the Building exceed the Real Estate Taxes for
the Base Year specified in Item 12 of the Definitions. Tenant’s proportionate share for
said Real Estate Taxes for each Lease Year or Partial Lease Year of the term of this
Lease or any renewal thereof shall be determined by dividing the total number of square
feet in the Premises by the total number of square feet of all leaseable building space
within the Building. Any payment due by Tenant hereunder shall be made during each Lease
Year or Partial Lease Year of the term of this Lease or any renewal thereof within thirty
(30) days after Tenant’s receipt of Landlord’s written certification of the amount due.
Tenant’s share shall be prorated in the event Tenant is required to make such payment for
a Partial Lease Year. In addition, should the taxing authorities include in such Real
Estate Taxes the value of any improvements made by Tenant, or include machinery,
equipment, fixtures, inventory or other personal property or assets of the Tenant, then
Tenant shall also pay 100% of the Personal Property Taxes and Real Estate Taxes for such
items. 

     If the
Lease expires during a Partial Lease Year, Landlord shall bill Tenant not more than sixty
(60) days prior to the expiration date of the Lease for its estimated pro rata share of
Real Estate Taxes for the Partial Lease Year. Tenant shall remit full payment to Landlord
within fifteen (15) days after receipt of such bill. If Tenant fails to remit such full
payment to Landlord, Landlord, in its sole discretion, may deduct the amount due from
Tenant’s Security Deposit and be entitled to all other rights and remedies hereunder for
Tenant’s default. 

ARTICLE V
REPAIRS AND
MAINTENANCE

Section 5.1 Repairs by
Landlord

     Landlord
shall, at its expense, keep the foundations and the roof in good order and repair, and
shall make structural repairs and replacements necessary to keep in good order and repair
the Center and the pipes and ducts running through the Premises and installed by
Landlord, but not including Tenant’s service connections therewith. In no event, however,
shall Landlord be responsible to Tenant for damages resulting from Landlord’s failure to
make repairs to the Center or the Premises unless Landlord shall have received written
notice of the request to make the repair and Landlord shall have failed to act within 30
days to remedy the condition described in such notice (except when the requested repair
is of an emergency nature and Landlord shall to repair the same within a reasonable
period of time). Landlord shall not be liable for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas, electricity, water,
rain, or leaks from any part of the Premises or from the pipes, appliances or plumbing
works or from the roof, street or subsurface or from any other place or by dampness or by
any other cause of whatsoever nature, unless directly caused by or attributable to
Landlord’s negligence or willful act or omission, but in no event shall Landlord be
liable for any consequential or speculative damages. All property of Tenant, including
merchandise and furnishings, kept or stored on the Premises shall be so kept or stored at
the risk of Tenant. If Landlord is required to make repairs by reason of any act,
omission or negligence of Tenant, any permitted subtenants, concessionaires or their
respective employees, agents, invitees, licensees or contractors, the cost of such
repairs shall be borne by Tenant and shall be due and payable within ten (10) days after
receipt of Landlord’s notification of the amount due. 

Section 5.2 Repairs and
Maintenance by Tenant

     Tenant
shall make and pay for all repairs to the interior of the Premises and shall replace all
things necessary to keep the same in a good state of repair, such as, but not limited to,
all fixtures, furnishings, lighting, doors, and store signs of Tenant. At its option,
Landlord may supply the air conditioning unit for the Premises and see, at its own cost,
that said unit is in good repair prior to Tenant’s occupancy. Tenant shall then maintain,
replace and keep in good repair all air conditioning, plumbing, heating and electrical
installations for the Premises. Any air conditioning unit supplied by Tenant shall remain
in the Premises for the duration of the Lease Term and any renewals thereof, and shall
become the property of the Landlord upon installation of such unit. Tenant shall at all
times keep the Premises and the immediate areas in front, behind and adjacent to it,
exterior entrances, exterior walls, all glass and show windows, moldings and bulkheads,
and all partitions, doors, floor surfaces, fixtures, equipment and appurtenances thereof
in good order, condition and repair, and in a satisfactory condition of cleanliness,
including reasonable periodic painting of the interior and, if applicable, the exterior
of the Premises, damage by unavoidable casualty and reasonable wear and tear excepted.
Tenant shall be fully responsible and liable for the maintenance and lighting of all its
exterior signs, and shall periodically repaint metal surfaces that rust or begin to
deteriorate from any causes. Any damage to the exterior walls to which a sign may be
attached, including but not limited to rust stains and structural cracking of the fascia,
caused by Tenant’s use of such sign, shall be repaired by Tenant at its own cost. Tenant
shall make such other necessary repairs in and to the Premises not specified in Section
5.1 hereof as the responsibility of Landlord, and shall keep in force a standard
maintenance agreement with a company acceptable to Landlord on all air conditioning
equipment and provide a copy of said maintenance agreement to Landlord. In addition to
the foregoing, Tenant shall, to the extent it is not an obligation of Landlord to
maintain as a Common Area expense, repair and maintain fire extinguishers and other fire
prevention equipment, including, but not limited to, a fire sprinkling system in the
Premises, in accordance with the recommendations or requirements of Landlord’s fire
engineer or Landlord’s fire insurance carrier or in accordance with any future
recommendations of Landlord’s fire insurance carrier or fire engineer, and in accordance
with applicable governmental codes. 

	

     If
Tenant refuses or neglects to properly repair and/or maintain the Premises as required
herein and to the reasonable satisfaction of Landlord as soon as reasonably possible
after not less than thirty (30) days written demand, Landlord may, but shall not be
obligated to, make such repairs and/or maintenance, without liability for any loss or
damage that may accrue to Tenant’s merchandise, fixtures, or other property or to
Tenant’s business by reason thereof, and upon completion thereof, Tenant shall pay
Landlord’s costs for making such repairs plus twenty percent (20%) for overhead, upon
presentation of the bill. Such bill shall include interest at the lesser of the highest
non-usurious rate permitted by applicable law or fifteen percent (15%) per annum of the
cost from the date of completion of repairs until the date payment is received by
Landlord. 

Section 5.3 Right of
Entry

     Landlord
or its representatives, after reasonable prior notice to Tenant (except in the case of
any emergency, when no notice is required), shall have the right to enter the Premises at
reasonable hours of any day during the Lease Term to: a) ascertain if the Premises are in
proper repair and condition, and further, Landlord or its representatives shall have the
right, without liability, to enter the Premises for the purpose of making repairs,
additions or alterations thereto or to the building in which the same are located,
including the right to take the required materials therefor into and upon the Premises
without the same constituting an eviction of Tenant in whole or in part, but in doing so,
Landlord shall use commercially reasonable efforts to make such repairs and modifications
in a fashion so as to not interfere with or disturb Tenant’s operations and the Rent
shall not abate while such repairs, alterations, replacements or improvements are being
made by reason of loss or interruption of Tenant’s business due to the performance of any
such work; and b) show the Premises to prospective purchaser, lenders and tenants. If
Tenant shall not be personally present to permit an entry into said Premises when for any
reason an entry therein shall be permissible, Landlord may enter the same by a master key
or by the use of force without rendering Landlord liable therefor and without in any
manner affecting Tenant’s obligations under this Lease. During the ninety (90) days prior
to the expiration or earlier termination of the Lease Term, Landlord may place a “For
Lease” sign on the Premises. 

Section 5.4 Sidewalks
and Outside Areas

     Nothing
shall be thrown or swept out of doors or windows of Tenant’s Premises onto sidewalks,
entrances, passages, courts, plazas or any of the Common Areas. Tenant agrees to use
reasonable diligence to keep the sidewalks and outside areas immediately in front, behind
and adjacent to the Premises broom-clean and otherwise keep said areas free of trash,
litter or obstruction of any kind. 

Section 5.5 Replacement
of Glass

     At the
commencement of the term of this Lease, all glass in the Premises shall be in good
condition scraped clean of any paint and undamaged. Tenant shall at its own expense
replace all glass thereafter broken or damaged ( except for glass broken or damaged by a
structural failure of the building ) with glass of the same quality and physical
properties. 

	

ARTICLE VI

ALTERATIONS, CHANGES AND IMPROVEMENTS

Section 6.1 Alterations,
Changes, and Improvements

     Tenant
shall not make or permit any alterations, additions or improvements to the Premises
without the prior written consent of the Landlord. Consent for minor alterations,
additions or improvements will not be unreasonably withheld or delayed by Landlord.
Tenant shall have the right at all times to install Tenant’s shelves, bins, machinery,
air conditioning or heating equipment and trade fixtures, hereinafter collectively called
“Tenant’s Trade Fixtures,” provided Tenant complies with all applicable governmental
laws, ordinances and regulations and all Landlord Rules & Regulations as per attached
Exhibit C, further provided that such installations by Tenant shall not overload, damage
or deface the Premises. Provided Tenant is not in default of any of the terms, conditions
or covenants of this Lease, Tenant shall have the right to remove at the termination of
this Lease any of Tenant’s Trade Fixtures installed, including any extra air conditioning
and heating equipment installed and paid for by Tenant, if any (as specifically
differentiated from any such equipment owned or installed by Landlord, and provided
further, that Tenant shall immediately repair at its own expense any damage caused by
such removal and leave the Premises in a broom-clean and orderly condition. All such work
shall be done at such times and in such manner as shall minimize any inconvenience to
other occupants of the Center of which the Premises is a part. All alterations, additions
and improvements made by Tenant (other than Installation of Tenant’s Trade Fixtures)
shall become the property of Landlord upon the termination of this Lease or Landlord may
require Tenant to remove such alterations, additions and improvements and any other
property placed in or on the Premises by Tenant and restore the Premises to its original
condition. Notwithstanding any provision of this Lease seemingly to the contrary, Tenant
shall never, under any circumstances, have the power to subject the interest of Landlord
in the Premises to any mechanics’ or materialmen’s liens or liens of any kind, nor shall
any provision contained in this Lease ever be construed as empowering the Tenant to
encumber or cause the Landlord to encumber the title or interest of Landlord in the
Premises. 

     Except
as described in the Addendum, Tenant hereby expressly acknowledges and agrees that no
alterations, additions repairs or improvements to the Premises of any kind are required
or contemplated to be performed as a prerequisite to the execution of this Lease and the
effectiveness thereof according to its terms or in order to place the Premises in a
condition necessary for the use of the Premises for the purposes set forth in this Lease,
that the Premises are presently complete and usable for the purpose set forth in this
Lease and that this Lease is in no way conditioned on Tenant making or being able to make
alterations, additions, repairs or improvements to the Premises, unless otherwise
specified under the Special Provisions section of the Definitions, notwithstanding the
fact that alterations, repairs, additions or improvements may be made by Tenant, for
Tenant’s convenience or for Tenant’s purposes, subject to Landlord’s prior written
consent, at Tenant’s sole cost and expense. Landlord’s approval of any plans,
specifications or work drawings shall create no responsibility or liability on the part
of the Landlord for their completeness, design sufficiency or compliance with all laws,
rules and regulations of governmental agencies or authorities. Landlord acknowledges that
it has approved the plans for the work Tenant is presently making to the Premises, as
contemplated by the addendum. 

     Tenant
shall have no authority, expressed or implied, to create or place any lien or encumbrance
of any kind or nature whatsoever upon, or in any manner to bind the interests of Landlord
in the Premises or to charge the rentals payable hereunder for any claim in favor of any
person dealing with Tenant, including those who may furnish materials or perform labor
for any construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by this
instrument. Tenant covenants and agrees that it will pay or cause to be paid all sums
legally due and payable by it on account of any labor performed or materials furnished in
connection with any work performed or materials furnished in connection with any work
performed on the Premises on which any lien is or can be validly and legally asserted
against its leasehold interest in the premises or the improvements thereon and that it
will save and hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against the
right, title and interest of the Landlord in the premises or under the terms of this
lease. Tenant agrees to give Landlord immediate written notice if any lien or encumbrance
is placed on the Premises resulting directly or indirectly form any act or omission of
Tenant. 

	

ARTICLE VII
INSURANCE
AND INDEMNITY

Section 7.1 Tenant’s
Insurance

     Tenant
shall maintain, at its own cost and expense, with responsible companies approved by
Landlord, commercial general liability insurance, insuring Landlord and Tenant, as their
interests may appear, against all claims, demands or actions for bodily injury, personal
injury or death of any one person in an amount of not less than $1,000,000.00; and for
bodily injury, personal injury or death of more than one person in any one accident in an
amount of not less than $2,000,000.00; and for damage to property in an amount of not
less than $500,000.00. Landlord shall have the right to direct Tenant to increase
coverage within reasonable amounts whenever it considers them inadequate. Such liability
insurance shall also cover and include all exterior signs maintained by Tenant. The
policy of insurance may be in the form of a general coverage or floater policy covering
these and other premises, provided that Landlord is specifically insured therein. Tenant
shall carry like coverage against loss or damage by boiler or compressor or internal
explosion of boilers or compressors, if there is a boiler or compressor in the Premises.
Tenant shall maintain insurance covering all glass forming a part of the Premises
including plate glass in the Premises and fire insurance against loss or damage by fire
or windstorms, with such endorsements for extended coverage, vandalism, malicious
mischief and special extended coverage as Landlord may require, covering 100% of the
replacement costs of any items of value, including but not limited to signs, stock,
inventory, fixtures, improvements, floor coverings and equipment. All of said insurance
shall be in form and in responsible companies satisfactory to Landlord, and shall provide
that it will not be subject to cancellation, termination or change except after at least
thirty (30) days’ prior written notice to Landlord. Any insurance procured by Landlord or
Tenant as herein required shall contain an express waiver of any right of subrogation by
the insurance company against Landlord. Certificates of insurance, together with
satisfactory evidence of the payment of the premiums thereon, shall be deposited with
Landlord on the day Tenant begins operations. Thereafter, Tenant shall provide Landlord
with evidence of proof of payment upon renewal of any such policy, not less than thirty
(30) days’prior to expiration of the term of such coverage. In the event Tenant fails to
obtain or maintain the insurance required hereunder, Landlord may obtain same and any
costs incurred by Landlord in connection therewith shall be payable by Tenant upon
demand. Landlord shall maintain a like amount of commercial general liability insurance
covering the Center, including, but not limited to sidewalks and parking lots. 

Section 7.2 Extra Hazard
Insurance Premiums

     Tenant
agrees that it will not keep, use, sell or offer for sale in or upon the Premises any
article or permit any activity which may be prohibited by the standard form of fire or
public liability insurance policy. Tenant agrees to pay any increase in premiums for fire
and extended coverage or public liability insurance which may be carried by Landlord on
the Premises or the Center of which they are a part, resulting from the type of
merchandise sold or services rendered by Tenant or activities in the Premises, whether or
not Landlord has consented to the same. In determining whether increased premiums are the
result of Tenant’s use of the Premises, a schedule, issued by the organization making the
insurance rate on the Premises, showing various components of such rate, shall be
conclusive evidence of the several items and charges which make up the fire and public
liability insurance rate on the Premises. 

     Tenant
shall not knowingly use or occupy the Premises or any part thereof, or suffer or permit
the same to be used or occupied for any business or purpose deemed extra hazardous on
account of fire or otherwise. In the event Tenant’s use and/or occupancy causes any
increase of premium for the fire, boiler and/or casualty rates on the Premises or any
part thereof above the rate for the normal occupancy legally permitted in the Premises,
Tenant shall pay such additional premium on the fire, boiler and/or casualty insurance
policy that may be carried by Landlord for its protection. Bills for such additional
premiums shall be rendered by Landlord to Tenant and shall be due from and payable by
Tenant within fifteen (15) days after received in writing. Failure to pay amounts due
hereunder shall be default by Tenant under this Lease. Landlord has received no notice
from its insurance carrier of any increase in Landlord’s insurance costs resulting from
the nature of Tenant’s occupancy of the Premises. 

Section 7.3 Indemnity

     a.
Tenant during the term hereof shall indemnify and save harmless Landlord from and against
any and all claims and demands whether for injuries to persons or loss of life, or damage
of property, occurring within the Premises or the Center and arising out of the use and
occupancy of the Premises by Tenant, or occasioned wholly or in part by any act or
omission of Tenant, its subtenants, agents, contractors, employees, servants, lessees or
concessionaires, excepting, however, such claims and demands, whether for injuries to
persons or loss of life, or damage to property, caused by the negligence of Landlord. In
case Landlord shall, without fault on its part, be made a party to any litigation
commenced by or against Tenant, then Tenant shall protect and hold Landlord harmless and
shall pay all costs, expenses and reasonable attorneys’ fees that may be incurred or paid
by Landlord in enforcing the covenants and agreements of this Lease. 

	

     b.
Landlord hereby agrees to indemnify Tenant, its officers, employees and directors, from
and against: (a) all claims resulting from or alleged to have resulted from any breach,
violation or non-performance of any covenant or obligation on the part of Landlord
contained in this Lease, and (b) all claims of injury or damage to person or property to
the extent that any such damage or injury; (i) may be incident to, arise out of, or be
proximately caused, wholly or in part, by an act, omission, negligence or misconduct on
the part of Landlord or any of its partners, officers, employees, agents or contractors,
(ii) may be the proximate result of the violation by Landlord or any of its partners,
officers, employees, agents or contractors, of any governmental laws, rules or
regulations, or the rules and regulations included in this Lease (as such rules and
regulations may hereafter at any time or from time to time be amended or supplemented),
or (iii) may in any other way arise from or out of the construction activities, occupancy
or use by Landlord or any of its partners, officers, employees, agents or contractors, of
the Premises. 

Section 7.4 Definition
and Liability of Landlord

     The
term Landlord as used in this Lease means only the owner or the mortgagee in possession
for the time being of the center in which the Premises are located or the owner of a
leasehold interest in the Center and/or the land thereunder so that in the event of sale
of the Center or an assignment of this Lease, or a demise of the Center and/or land,
Landlord shall be and hereby is entirely freed and relieved of all obligations of
Landlord hereunder arising after such transfer, provided the transferee agrees in writing
to assume all obligations of the Landlord hereunder, and it shall be deemed without
further agreement between the parties and such purchaser(s), assignee(s) or lessee(s)
that the Purchaser, assignee or lessee has assumed and agreed to observe and perform all
obligations of Landlord hereunder. 

     It is
specifically understood and agreed that there shall be no personal liability on Landlord
in respect to any of the covenants, conditions or provisions of this Lease; in the event
of a breach or default by Landlord of any of its obligations under this Lease, Tenant
shall look solely to the equity of Landlord in the Center for the satisfaction of
Tenant’s remedies. 

ARTICLE VIII
DAMAGE,
DESTRUCTION AND CONDEMNATION

Section 8.1 Damage or
Destruction by Fire or Other Casualty

		A. 		Tenant
shall give prompt notice to Landlord in case of fire or other damage to the Premises or
the Center containing the Premises. In the event the Premises are damaged by fire,
explosion, flood, tornado or by the elements, or through any casualty, or otherwise,
after the commencement of the term of this Lease, the Lease shall continue in full force
and effect. If the extent of the damage is less than fifty percent (50%) of the cost of
replacement of the Premises, the damage shall promptly be repaired by Landlord at
Landlord’s expense, provided that Landlord shall not be obligated to expend for such
repair in an amount in excess of the insurance proceeds recovered or recoverable as a
result of such damage, and that in no event shall Landlord be required to replace
Tenant’s stock in trade, fixtures, furniture, furnishings, floor coverings and equipment.
Landlord must complete all such repairs within two hundred seventy (270) days after the
date of the casualty, and if Landlord shall fail to do so, Tenant may elect to terminate
this Lease at any time thereafter. In the event of any such damage and (a) Landlord is
not required to repair as hereinabove provided, or (b) the Premises shall be damaged to
the extent of fifty percent (50%) or more of the cost of replacement, or (c) the building
of which the Premises are a part is damaged to the extent of twenty-five percent (25%) or
more of the cost of replacement, or (d) all buildings (taken in the aggregate) in the
Center shall be damaged to the extent of more than twenty-five Percent (25%) of the
aggregate cost of replacement, Landlord must elect either to repair or rebuild the
Premises or the building or buildings, or to terminate this Lease, such notice of such
election must be given to Tenant within ninety (90) days after the occurrence of the
event causing the damage.

		B. 		If
the casualty, repairing or rebuilding shall render the Premises untenantable, in whole or
in part, a proportionate abatement of the Fixed Minimum all Rent shall be allowed from
the date when the damage occurred until the date Landlord completes the repairing or
rebuilding, said proportion to be computed on the basis of the relation which the gross
square foot area of the space rendered untenantable bears to the floor area of the
Premises.

		C. 		In
the event the Premises or the building(s) shall be damaged in whole or in substantial
part within the last twenty-four (24) months of the original term, or within the last
twenty-four (24) months of the last renewal term, if renewals are provided for herein,
Landlord shall have the option, exercisable within ninety (90) days following such
damage, of terminating this Lease, effective as of the date of receipt of mailing notice
to Tenant thereof. If any such termination occurs during the initial term, any options
for renewal shall automatically be of no further force or effect.

		D. 		No
damage or destruction of the Premises or the building(s) shall allow Tenant to surrender
possession of the Premises nor affect Tenant’s liability for the payment of Rent or any
other covenant contained herein, except as may be specifically provided in this Lease.
Notwithstanding any of the provisions herein to the contrary, Landlord shall have no
obligation to rebuild the Premises or the building(s) and may at its own option cancel
this Lease unless the damage or destruction is a result of a casualty covered by
Landlord’s insurance policy.

Section 8.2 Condemnation

		(a) 		Total:
In the event the entire Premises shall be appropriated or taken under the power of
eminent domain by any public or quasi-public authority, this Lease shall terminate and
expire as of the date of title vesting in such proceeding, and Landlord and Tenant shall
thereupon be released from any further liability hereunder.

		(b) 		Partial:
If any part of the Premises shall be taken as aforesaid, and such partial taking shall
render that Portion not so taken unsuitable for the business of Tenant, as reasonably
determined by Landlord, then this Lease and the term herein shall cease and terminate as
aforesaid. If such partial taking is not extensive enough to render the Premises
unsuitable for the business of Tenant, then this Lease shall continue in effect, except
that the Fixed Minimum Rent shall be reduced in the same proportion that the floor area
of the Premises taken bears to the original floor area leased and Landlord shall, upon
receipt of the award in condemnation, make all necessary repairs or alterations to the
building in which the Premises are located so as to constitute the portion of the
building not take a complete architectural unit, but such work shall not exceed the scope
of the work to be done by Landlord in originally constructing said building, nor shall
Landlord, in any event, be required to spend for such work an amount in excess of the
amount received by Landlord as damages for the part of the Premises so taken. “Amount
received by Landlord” shall mean that part of the award in condemnation that is free and
clear to Landlord of any collection by mortgagee for the value of the diminished fee.

		(c) 		Termination:
If more than Twenty Percent (20%) of the floor area of the building in which the Premises
are located shall be taken as aforesaid, Landlord may, by written notice to Tenant,
terminate this Lease, such termination to be effective as aforesaid.

		(d) 		Rent
on Termination: If this Lease is terminated as provided in this paragraph, the Rent shall
be paid up to date that possession is so taken by public authority and Landlord shall
make an equitable refund of any Rent paid by Tenant in advance.

		(e) 		Award:
Tenant shall not be entitled to and expressly waives all claim to any condemnation award
for any taking, whether in whole or partial, and whether for diminution in value of the
leasehold or to the fee, although Tenant shall have the right, to the extent that the
same shall not reduce Landlord’s award, to claim from the condemnor, but not from
Landlord, such compensation as may be recoverable by Tenant in its own right for damage
to Tenant’s business, fixtures and improvements installed by Tenant as its expense.

	

ARTICLE IXDEFAULT

Section 9.1 Default

     Landlord
may, at its option, terminate this Lease, as provided below and take the action outlined
in Paragraph 9.2 hereof, IF: 

		A. 		Tenant
defaults in the payment of any rentals or any other payments when due, and such default
shall continue for ten (10 days after notice from Landlord to Tenant; OR

		B. 		Tenant
defaults in fulfilling any of the other covenants or obligations of this Lease on
Tenant’s part to be performed hereunder, and such default has not been cured within
thirty (30) days after written notice from Landlord to Tenant specifying the nature of
said default; OR

		C. 		The
default so specified shall be of such a nature that the same cannot be reasonably cured
or remedied within said thirty (30) day period, if Tenant shall not in good faith have
commenced the curing or remedying of such default within such thirty (30) day period and
shall not thereafter diligently proceed therewith to completion; OR

		D. 		At
any time during the term should there be filed by or against Tenant or against any
successor tenant then in possession, in any court, pursuant to any statute, either of the
United State or any state, a petition:

		 		(i)	in
bankruptcy,

				(ii) 	alleging
insolvency,

		 		(iii)	for
reorganization,

				(iv) 	for
the appointment of a receiver or trustee,

		 		(v)	for
an arrangement under the Bankruptcy Acts, or

		 		(vi)	if
a similar type or proceeding shall be filed and any such petition or filing against
Tenant has not been dismissed within a period of one hundred twenty (120) days; OR

		E. 		Tenant
makes or proposes to make an assignment for the benefit of creditors, OR

		F. 		Tenant
does, or permits to be done, any act which creates a mechanic’s or materialmen’s lien or
claim therefore against the Premises of the Center and fails to have the same released or
bonded over within thirty (30) days after receipt of a notice of the filing thereof; OR

		G. 		Tenant
fails to furnish Landlord with a copy of any insurance policy required to be furnished by
Tenant to Landlord when due, and such default shall continue for thirty (30) days after
written notice from Landlord, Landlord may elect:

		 		(i)	to
terminate this Lease, or

		 		(ii)	to
assess and collect an administrative fee of Five Dollars ($5.00) for each day said policy
has not been received in the office of Landlord at the close of each business day.

	

Section 9.2 Landlord’s
Rights on Default

If the notice provided shall have
been given and the term shall expire as aforesaid, Landlord may pursue any of its rights
and remedies at law or in equity, including the right to terminate this Lease, in which
case Tenant shall immediately surrender the Premises to Landlord. If Tenant fails to
surrender the Premises, Landlord may, in compliance with applicable law and without
prejudice to any other right or remedy, enter upon and take possession of the Premises
and expel and remove Tenant, Tenant’s property and any party occupying all or any part of
the Premises. 

     Should
Landlord elect to re-enter or should it take possession pursuant to legal proceedings or
pursuant to any notice provided for by law, it may make such alterations and repairs as
may be necessary in order to relet the Premises or any part thereof, for such term or
terms (which may be for a term extending beyond the term of this Lease) and at such
rentals and upon such other terms and conditions as Landlord, it its sole discretion, may
deem advisable. Upon each such reletting, all rentals received by Landlord from such
reletting shall be applied, first, to the payment of any indebtedness, other than Rent
due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses
of such reletting, including brokerage fees and to costs of such alterations and repairs;
third, to the payment of Rent due and unpaid hereunder, the residue, if any, shall be
held by Landlord and applied in payment of the future rent as the same may become due and
payable hereunder. If such rentals received from such reletting during any month be less
than that to be paid during the month by Tenant as set forth herein, Tenant shall pay any
such deficiency to Landlord. Such deficiency shall be calculated and paid monthly.
Landlord shall recover from Tenant all damages it may incur by reason of Tenant’s
default, including the cost of recovering the Premises and, including charges equivalent
to Rent reserved in this Lease, for the remainder of the stated terms, all of which
amounts shall be immediately due and payable from Tenant to Landlord. 

	

     The
parties hereby waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other or any matters whatsoever arising out of
or in any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant’s use or occupancy of the Premises, and/or claim of injury or damage. 

     In the
event of a breach by Tenant of any of the covenants or provisions hereof, Landlord shall
have, in addition to any other remedies which it may have, the right to invoke any remedy
allowed at law or in equity, including injunctive relief, to enforce Landlord’s rights or
any of them, as if re-entry and other remedies were not herein provided for. 

     In the
event of any litigation arising out of a breach or the enforcement of this Lease, the
prevailing party in such litigation shall be entitled to recovery of all costs, including
reasonable attorneys’ fees. 

     Notwithstanding
anything in this Lease to the contrary, Landlord reserves all rights which any state or
local laws, rules, regulations or ordinances confer upon a Landlord against a tenant in
default. 

Section 9.3 Non-Waiver
Provisions

     The
failure of Landlord to insist upon a strict performance of any of the terms, conditions
and covenants herein shall not be deemed to be a waiver of any rights or remedies that
Landlord may have and shall not be deemed a waiver of any subsequent breach or default in
the terms, conditions and covenants herein contained except as may be expressly waived in
writing. 

     The
maintenance of any action or proceeding to recover possession of the Premises or any
installment or installments of Rent or any other monies that may be due or become due
from Tenant to Landlord shall not preclude Landlord from thereafter instituting and
maintaining subsequent actions or proceedings for the recovery or possession of the
premises or of any other monies that may be due or become due from Tenant including all
expenses, court costs and attorneys’ fees and disbursements incurred by Landlord in
recovering possession of the Premises and all costs and charges for the care of the
Premises while vacant. Any entry or re-entry by Landlord shall not be deemed to absolve
or discharge Tenant from liability hereunder. 

ARTICLE X
SECURITY
DEPOSIT

Section 10.1 Security
Deposit

		A. 		Tenant
has deposited with Landlord the sum specified in Item 11 of the Definitions to be
retained by Landlord without liability for interest, as security for the payment of all
rent and other sums of money which shall or may be payable for the full stated term of
this Lease, and any extension or renewal thereof, and for the faithful performance of all
the terms of this Lease to be observed and performed by Tenant.

		B. 		If
any of the Rent herein reserved or any other sum payable by Tenant to Landlord shall be
overdue and unpaid or should Landlord make payment son behalf of Tenant, or it Tenant
shall fail to perform any of the terms of this Lease, then Landlord may, at its option
and without prejudice to any other remedy which Landlord may have on account thereof,
appropriate and apply said entire deposit or so much thereof as may be necessary to
compensate Landlord toward the payment of Rent or Additional Rent or loss or damage
sustained by Landlord due to breach on the part of Tenant; and Tenant shall promptly upon
demand restore said security to the original sum deposited. Within fifteen days after the
end of the twenty-fourth month of the Lease Term, provided Tenant shall not be in default
hereunder and shall have complied with all the terms, covenants and conditions of this
Lease, return to Tenant said sum on deposit or such portion thereof then remaining on
deposit with Landlord as set forth herein.

 
	

Section 10.2 Personal
Property

     Landlord
hereby waives any statutory lien or other interest (including any security interest) in
all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights,
chattel paper and other personal property of Tenant situated on the Premises. 

	

Section 10.3 Transfer of
Deposit

     In the
event of a sale or transfer of the Center or any portion thereof which includes the
Premises, or in the event of the making of a lease of the Center or of any portion, or in
the event of a sale or transfer of the leasehold estate under any such underlying lease,
the grantor, transferor or Landlord, as the case may be, shall thereafter be entirely
relieved of all terms, covenants and obligations thereafter to be performed by Landlord
under this Lease to the extent of the interest or portion so sold, transferred or leased,
and it shall be deemed and construed, without further agreement between the parties and
the purchaser, transferee or Tenant, as the case may be, has assumed and agreed to carry
out any and all covenants of Landlord hereunder; provided that (i) any amount then due
and payable to Tenant or for which Landlord or the then grantor, transferor or Landlord
would otherwise then be liable to pay to Tenant (it being understood that the owner of an
undivided interest in the fee or any such lease shall be liable only for his or its
proportionate share of such amount) shall be paid to Tenant; (ii) the interest of the
grantor, transferor or Landlord, as Landlord, in any funds then in the hands of Landlord
or then grantor, transferor or Landlord in which Tenant has an interest (including all
security deposits), shall be turned over, subject to such interest, to the then grantee,
transferee or Tenant; and (iii) notice of such sale, transfer or lease shall be delivered
to Tenant. 

ARTICLE XI
ADDITIONAL
TENANT AGREEMENTS

Section 11.1 Mortgage
Financing and Subordination

     This
Lease and all of Tenant’s rights hereunder are and shall be subordinate to the
present mortgage upon the Center, as well as to any existing ground lease; however,
Tenant shall, upon request of either Landlord, the holder of any mortgage or Deed of
Trust now or hereafter placed upon the Landlord’s interest in the Premises or future
additions thereto, and to any ground lease now or hereafter affecting the Premises,
execute and deliver upon demand, such further instruments subordinating this Lease to the
lien of any such mortgage or mortgages, and such ground lease, provided such
subordination shall be upon the express condition that this Lease shall be recognized by
the mortgagees and ground lessors and that the rights of Tenant shall remain in full
force and effect during the term of this Lease and any extension thereof, notwithstanding
any default by the mortgagors with respect to the mortgages or any foreclosure thereof,
or any default by the ground lessee, so long as Tenant shall perform all of the covenants
and conditions of this Lease. Tenant agrees to execute all agreements reasonably required
by Landlord’s mortgagee or ground lessor or any purchaser at a foreclosure sale or
sale in lieu of foreclosure by which agreements Tenant will attorn to the mortgagee or
purchaser or ground lessor. 

Section 11.2 Assignment
or Subletting

     All
assignments of this Lease or subleases of the Premises by Tenant shall be subject to and
in accordance with all of the provisions of this Section. 

     Tenant
may assign this Lease or sublease the Premises, in whole or in part, to a wholly-owned
corporation or controlled subsidiary of Tenant or to a party other than a wholly-owned
corporation or controlled subsidiary of Tenant which acquires Tenant or substantially all
of Tenant’s assets. All other assignments of subleases may not be made without first
having obtained the written consent of Landlord, such consent not to be unreasonably
withheld or delayed. Unless otherwise agreed by Landlord in writing, no such assignment
shall release Tenant from its obligations under this Lease. 

     Any
assignment of sublease by Tenant shall be only for the purpose specified in Section 1.4,
Use of Premises, and for no other purpose, and in no event shall any assignment or
sublease of the Premises release or relieve Tenant from any obligations of this Lease and
said assignee or sublessee must assume Tenant’s obligations under this Lease. 

     In the
event that Tenant shall seek Landlord’s permission to assign this Lease or sublet the
Premises, Tenant shall provide to Landlord the name, address, financial statement and
business experience resume of the proposed assignee or subtenant for the three prior
years and such other information concerning such proposed assignee or subtenant as
Landlord may reasonably request. This information shall be in writing and shall be
received by Landlord no less than thirty (30) days’prior to the effective date of the
proposed assignment or sublease. It shall be a condition to any consent by Landlord to an
assignment or sublease that tenant shall pay to Landlord a processing fee in the amount
of One Hundred Twenty Five and No/100 ($125.00). Tenant also agrees to reimburse Landlord
for any reasonable legal fees incurred by Landlord in connection with the review and
preparation of assignment or sublease-related documents. Payment of the processing fee
shall be submitted along with Tenant’s request for Landlord’s consent. Any consent by
Landlord to any assignment or sublease, or to the operation of a concessionaire or
licensee, shall not constitute a waiver or the necessity for such consent to any
subsequent assignment or sublease, or operation by a concessionaire or licensee. 

	

     Any
breach of the assignment clause by Tenant will constitute a default under the terms of
this Lease and Landlord shall have all rights and remedies available to it as set forth
herein. 

     In the
event Tenant shall sublease the entire Premises for rentals in excess of those rentals
payable hereunder, Tenant shall pay to Landlord, as Additional Rent hereunder, one-half
of the net amount (after out-of-pocket expenses directly related to such sublease) all
such excess rentals. 

     Any
proposed assignee or subtenant of Tenant shall assume Tenant’s obligations hereunder and
deliver to Landlord an assumption agreement in form satisfactory to Landlord no less than
ten (10) days prior to the effective date of the proposed assignment. 

     Notwithstanding
any of the foregoing provisions, if Tenant is then in default under any of the terms of
this Lease, Tenant may not assign or sublet the Premises in whole or in part. 

Section 11.4 Short Form
Lease

     Neither
party shall record this Lease or a short form thereof without the express written consent
of the other. 

Section 11.5 Surrender
of Premises and Holding Over

     At the
expiration of the term, Tenant shall surrender the Premises in good condition, reasonable
wear and tear and damage by casualty excepted, and Tenant shall surrender all keys for
the Premises to Landlord at the place then fixed for the payment of Rent and shall inform
Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Tenant
shall remove all its trade fixtures and any alterations or improvements, subject to the
provisions of Section 6.1, before surrendering the Premises, and shall repair, at its own
expense, any damage to the Premises caused thereby. Tenant’s obligations to observe or
perform this covenant shall survive the expiration or other termination of the term of
this Lease. In the event Tenant remains in possession of the Premises after the
expiration of the tenancy created hereunder, whether or not with the consent or
acquiescence of Landlord, and without the execution of a new lease, Tenant, at the option
of Landlord, shall be deemed to be occupying the Premises as a tenant at will on a
week-to-week tenancy shall be payable weekly at 150% of the Fixed Minimum Rent, and 150%
of all other charges due hereunder, and it shall be subject to all the other terms,
conditions, covenants, provisions and obligations of this Lease, and no extension or
renewal of this Lease shall be deemed to have occurred by such holding over. Tenant’s
obligations to observe or perform this covenant shall survive the expiration or other
termination of the term of this Lease. 

Section 11.6 Estoppel
Certificates

     Landlord
and Tenant agree to provide one another at any time, within ten (10) days of receipt of a
written request, a statement certifying that this Lease is unmodified and in full force
and effect or, if there have been modifications, that same are in full force and effect
as modified and stating the modifications, and the dates to which the Fixed Minimum Rent
and other charges have been paid in advance, if any. It is intended that any prospective
purchaser or mortgagee of the Premises may rely upon any such statement delivered
pursuant to this paragraph. 

Section 11.7 Delay of
Possession

     If the
Landlord is unable to give possession of the Premises on the date of the commencement of
the aforesaid term by reason of the holding over of any prior tenant or tenants for any
other reason, then an abatement or diminution of the Rent to be paid hereunder shall be
allowed Tenant under such circumstances, but nothing herein shall operate to extend the
term of the Lease beyond the agreed expiration date; and said abatement of Rent shall be
the full extent of Landlord’s liability to Tenant for any loss or damage to Tenant on
account of said delay in obtaining possession of the Premises. 

Section 11.8 Compliance
With Law, Waste and No Nuisances

     Tenant
shall comply with all governmental laws, ordinances and regulations applicable to Tenant’s
use of the Premises and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in, upon, or connected with the
Premises, all at Tenant’s sole cost and expense. Tenant shall not commit, or suffer to be
committed, any waste upon the Premises or any nuisance, other act, or thing which may
disturb the quiet enjoyment of any other tenant in the Center in which the Premises may
be located. 

	

Section 11.9 Rules and
Regulations

     Tenant’s
use of the Premises shall be subject, at all times during the term of this Lease, to
Landlord’s right to adopt in writing, from time to time, modify and/or rescind reasonable
Rules and Regulations not in conflict with any of the express provisions hereof governing
the use of the parking areas, walks, driveways, passageways, signs, exterior of the
building, lighting and other matters affecting other tenants in and the general
management and appearance of the Center of which the Premises are a part, but no such
rule or regulation shall discriminate against Tenant. The current Rules and Regulations
are attached hereto as Exhibit “C” and made a part hereof. 

Section 11.10 Abandonment

     If
Tenant shall permanently abandon, vacate or surrender the Premises, or be dispossessed by
process of law or otherwise, any personal property belonging to Tenant left on the
Premises shall, at the option of the Landlord, be deemed abandoned. 

Section 11.11 Hazardous
Waste

     The
term “Hazardous Substances”, as used in this lease shall mean pollutants, contaminants,
toxic or hazardous wastes, or any other substances, the use and/or removal of which is
required or the use of which is restricted, prohibited or penalized by any “Environmental
Law”, which term shall mean any federal, state or local law or ordinance or other statute
of a governmental or quasi-governmental authority relating to pollution or protection of
the environment. Tenant hereby agrees that (i) no activity will be conducted on the
Premises that will produce any Hazardous Substance, except for such activities that are
part of the ordinary course of Tenant’s business activities that are part of the ordinary
course of Tenant’s business (the “Permitted Activities”), provided said Permitted
Activities are conducted in accordance with all Environments Laws and Tenant shall be
responsible for obtaining any required permits and paying any fees and providing any
testing required by any governmental agency; (ii) the Premises will not be used in any
manner for the storage of any Hazardous Substances except for the storage of such
materials that are used in the ordinary course of Tenant’s business (the “Permitted
Materials”), provided such Permitted Materials are properly stored in a manner and
location meeting all Environmental Laws; (iii) no portion of the Premises will be used as
a landfill or a dump; (iv) Tenant will not install any underground tanks of any type: (v)
Tenant will not allow any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute a public or private
nuisance; (vi) Tenant will not permit any Hazardous Substances to be brought onto the
Premises, except for the Permitted Materials described above, and if so brought or found
located thereon, the same shall be immediately removed, with proper disposal, and all
required cleanup procedures shall be diligently undertaken pursuant to all Environmental
Laws. Landlord or Landlord’s representative shall have the right but not the obligation
to enter the Premises for the purpose of inspecting the storage, use and disposal of
Permitted Materials to ensure compliance with all Environmental Laws. Should it be
determined, in Landlord’s sole opinion, that said Permitted Materials are being
improperly stored, used, or disposed of, then Tenant shall immediately take such
corrective action as requested by Landlord. Should Tenant fail to promptly take such
corrective action, Landlord shall have the right to perform such work, and Tenant shall
promptly reimburse Landlord for any and all costs associated with said work. If, at any
time during or after the term of this Lease, the Premises are found to be so contaminated
or subject to said condition as a result of Tenant’s actions or inactions, Tenant shall
diligently institute proper and thorough cleanup procedures at Tenant’s sole cost, and
Tenant agrees to indemnify and hold Landlord harmless from all claims, demands, actions,
liabilities, costs, expenses, damages and obligations of any nature arising from or as a
result of the use of Premises by Tenant. The foregoing indemnification shall survive the
termination or expiration of this Lease. 

ARTICLE XII

MISCELLANEOUS PROVISIONS

Section 12.1 Notices

     Whenever
notice shall or may be given to either of the parties by the other, such notice shall be
in writing and be either delivered in person or sent by registered or certified mail,
with return receipt requested. 

	

     Notice
to Landlord shall be sent to the address specified in Item 14 of the Definitions. 

     Notice
to Tenant shall be sent to the address specified in Item 14 of the Definitions. 

     If by
mail, any notice under this Lease shall be deemed to have been given at the time it is
received by the addressee. 

Section 12.2
Modification; Binding Agreement; Entire Agreement

     This
Lease contains all of the agreements between the parties hereto, and it may not be
modified in any manner other than by agreement in writing signed by all parties hereto or
their successors in interest. The terms, covenants and conditions contained herein shall
inure to the benefit of and be binding upon Landlord and Tenant and their respective
heirs, successors and assigns, except as may be otherwise expressly provided in this
Lease. This Lease, together with all exhibits thereto constitutes the entire agreement
between the parties concerning the leasing of space in the Center and supersedes all
prior agreements relating thereto. 

Section 12.3 Provisions
Severable

     If any
term or provision of this Lease or the application thereof to any person or circumstance
shall, to any extent, be illegal, invalid or unenforceable, the remainder of this Lease,
or the application of such term or provision to persons or circumstances other than those
to which it is held illegal, invalid or unenforceable shall not be affected hereby and
each term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law. 

Section 12.4 Captions

     The
captions contained herein are for convenience and reference only and shall not be deemed
as part of this Lease or construed as in any manner limiting or amplifying the terms and
provisions of this Lease to which they relate. 

Section 12.5
Relationship of the parties

     Nothing
herein contained shall be deemed or construed as creating the relationship of principal
and agent or of partnership or joint venture between the parties hereto; it being
understood and agreed that neither the method of computing rent nor any other provision
contained herein nor any acts of the parties hereto shall be deemed to create any
relationship between the parties other than that of Landlord and Tenant. 

Section 12.6 Accord and
Satisfaction

     No
payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein
stipulated shall be deemed to be other than on account of the earliest stipulated Rent
nor shall any endorsement or statement on any check or any letter accompanying any check
or payment without prejudice to Landlord’s right to recover the balance of such Rent or
pursue any other remedy provided for in this Lease or available at law or in equity. 

Section 12.7 Broker’s
Commission

     Except
as described in the Addendum, Tenant warrants that there are no claims for broker’s
commissions or finder’s fees attributable to Tenant in connection with its execution of
this Lease and agrees to indemnify and save Landlord harmless from any liability that may
arise from such claim, including reasonable attorneys’fees. 

Section 12.8 Due
Authorization; Corporate Status

     In the
event this Lease is signed on behalf of Tenant by a person in a representative capacity,
each person or persons signing in such capacity represents and warrants to the Landlord
and its successors and assigns that: 

	 	
a.
the execution and delivery of this Lease has been duly and validly authorized and all
requisite actions have been taken to make it valid and binding on the Tenant;

	 	
b.
the Tenant will, on the date of the commencement of this Lease, be duly organized,
validly existing and in good standing in the state of its organization and entitled to
conduct its business in the state where the Premises are located.

	

     If
Tenant is a corporation, Tenant’s corporate status shall continuously be in good standing
and active and current with the state of its incorporation and the state in which the
Center is located at the time of execution of the Lease and Tenant shall keep its
corporate status active and current throughout the term of the Lease or any extensions or
renewals. 

Section 12.9
Substitution of Premises

     Landlord
shall have no right, after the date of execution of this Lease, to substitute for the
Premises any other premises in the building. 

Section 12.10 Certain
Rights Reserved to Landlord

     Landlord
reserves and may exercise the following rights without affecting Tenant’s obligations
hereunder: 

     a. to
change: 

		1. 		the
name of the property;

		2. 		the
street address if so directed by the appropriate governmental authority;

		3. 		the
suite numbers of the building (landlord to pay for all reasonable costs associated with
such change).

 
	

     b. to
install or maintain a sign or signs on the exterior of the building 

Section 12.11 Covenant
of Quiet Enjoyment.

     Subject
to the provisions of Sections 8.1 and 8.2 of this Lease, provided Tenant pay the Rent and
other charges provided herein and complies with the terms of this Lease, its quiet
enjoyment of the Premises during the Lease Term shall not be disrupted. 

EXECUTED BY LANDLORD, this 12th day
of July , 2000. 

LANDLORD:  RBP, LLC an
Alabama Limited Liability Company
By:  Engel Realty Company, Inc., It’s Managing Member

By:  /s/ William E.
Coleman 

Its: President 

EXECUTED BY TENANT, this 12th day of
July, 2000. 

TENANT:  BioCryst
Pharmaceuticals, Inc.

By:  /s/ W.Randall
Pittman 

Title: Chief Financial
Officer 

	

EXHIBITS: 

The exhibits listed hereunder and
attached to this Lease are incorporated and made a part hereof by reference: 

Exhibit A - Legal Description (not
included)
Exhibit B - Site Plan (not included)
Exhibit C - Rules and Regulations
Exhibit
D - Addendum to Lease
Exhibit E - Tenant Improvements and Leasing Commissions 

	

“EXHIBIT C”
Rules And
Regulations

		1. 		The
sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors or
halls shall not b obstructed or encumbered by any Tenant or used for any purpose other
than ingress and egress to and from the Premises.

		2. 		No
awnings or other projections shall be attached to the outside walls of the Center without
the prior written consent of the Landlord. No curtains, blinds, shades or screens shall
be attached to, hung in or used in connection with any window or door of the Premises
without the prior written consent of the Landlord. Such awnings, projections, curtains,
blinds, shades, screens or other fixtures must be quality type, design and color, and
attached in the manner approved by the Landlord.

		3. 		No
sign advertisement, notice or other lettering shall be exhibited, inscribed, painted or
affixed by any Tenant on any part of the outside or inside of the premises or Center
without the prior written consent of the Landlord. In the event of the violation of the
foregoing by any Tenant, the Landlord may remove such violation of this rule at the
expense of Tenant. Exterior signs at front doors shall be inscribed, painted or affixed
at the Tenant’s expense and shall be of a size, color and style acceptable to the
Landlord. Landlord reserves the right to install and maintain a sign of signs on the
exterior of the Center.

		4. 		The
sashes, sash doors, skylights, windows and doors that reflect or admit light and air into
the halls, passageways or other public places in the Center shall not be covered or
obstructed by any Tenant, nor shall any bottles, parcels or other articles be placed on
the window ledges.

		5. 		No
showcase or other articles shall be put in front or affixed on any part of the exterior
of the Center nor placed in the halls, corridors or vestibules, without the prior written
consent of the Landlord.

		6. 		The
water, wash closets and other plumbing fixtures shall not be used for any purpose other
than those for which they were constructed, and no sweepings, rubbish, rags or other
substance shall be thrown therein. All damages resulting from any misuse of the fixtures
shall be borne by the Tenant who, or whose servants, employees or agents, shall have
caused the same.

		7. 		No
Tenant shall mark, paint, drill into or in any way deface any part of the Premises or the
Center of which they form a part. No boring, cutting or stringing of wires shall be
permitted except with the prior written consent of Landlord as it may direct. No Tenant
shall lay linoleum or other similar floor covering, so that the same shall come in direct
contact with the floor of the Premises, and if linoleum or other similar floor covering
is desired to be used, an interlining of builder’s deadening felt shall be first affixed
to the floor by a paste or other similar material soluble in water, the use of cement or
other similar adhesive material being expressly prohibited.

		8. 		No
bicycles, baby carriages, vehicles, birds, or animals of any kind shall be brought into
or kept in or about the Premises, and no cooking shall be done or permitted by any Tenant
in the Premises. However, this does not prevent Tenant from having coffee, soft drinks,
candy and other items for use of Tenant’s employees, servants, agents or visitors. Tenant
shall not cause or permit any unusual or objectionable odors to be produced upon or
permeates from the Premises.

		9. 		No
space in the Center shall be used for manufacturing or for the sale of property of any
kind at auction.

		10. 		No
Tenant shall make or permit to be made, any disturbing noises or disturb or interfere
with occupants of the Center or neighboring buildings or premises of those having
business with them. No Tenant shall throw anything out the doors, windows or skylights,
or down the passageways.

		11. 		No
additional locks or bolts of any kind shall be placed upon any of the doors or windows by
any Tenant, nor shall any changes be made in existing locks or the mechanism thereof,
without the prior written approval of Landlord, which approval shall not be unreasonably
withheld. Tenant shall be supplied, free of charge, with two keys for each door on the
Premises. Each Tenant must, upon the termination of his tenancy, restore to the Landlord
all keys of stores, offices and toilet rooms, either furnished to or otherwise procured
by such Tenant.

		12. 		All
removals of the carrying in or out of any safes, freight furniture or bulky matter of any
description must take place during the hours which the Landlord or agent may determine
from time to time. The Landlord reserves the right to prescribe the weight and position
of all safes, which must be placed upon two-inch plank strips to distribute the weight.
The moving of safes with other fixtures or bulky matter of any kind must be made with
previous notice to the Landlord and under his supervision. Tenant agrees not to place a
load upon any floor of the Premises exceeding the floor load per square foot area which
such floor was (and is) designed to carry and which is allowed by law. Business machines
and mechanical equipment shall be placed and maintained by Tenant at Tenant’s expense in
settings sufficient, in Landlord’s judgment, to absorb and prevent vibration, noise and
annoyance.

		13. 		No
Tenant shall occupy or permit any portion of the Premises leased to him to be occupied as
an office for a public stenographer or a public typist, for the manufacture or sale of
liquor, narcotics, dope or tobacco in any form, as a barber or manicure shop, or as an
employment bureau.

		14. 		No
Tenant shall open, or permit windows in the Premises to be opened at any time.

		15. 		The
Premises shall not be used for lodging or sleeping, or for any immoral or illegal
purposes.

		16. 		The
requirements of Tenants will be attended to only upon application to the office of the
Center. Employees shall not perform any work or do anything outside their regular duties
unless under special instructions from the office of the Landlord.

		17. 		Canvassing,
soliciting and peddling in the Center are prohibited and each Tenant shall cooperate to
prevent the same.

	

“EXHIBIT D”
ADDENDUM
TO LEASE

		1. 		Fixed
Minimum Rent Payment: Tenant agrees to pay Fixed Minimum Rent in the following amounts:

	 	July
1, 2000 - June 30, 2001      :      $32,179.58/month
July 1, 2001 - June 30, 2002      :     
$33,144.97/month 
July 1, 2002 - June 30, 2003      :      $34,139.32/month
July 1, 2003 - June 30,
2004      :      $35,163.50/month 
July 1, 2004 - June 30, 2005      :      $36,218.40/month
July 1, 2005 -
June 30, 2006      :      $37,304.96/month
July 1, 2006 - June 30, 2007      :      $38,424.11/month
July 1,
2007 - June 30, 2008      :      $39,576.83/month
July 1, 2008 - June 30, 2009      :      $40,764.13/month

July 1, 2009 - June 30, 2010      :      $41,987.06/month

		2. 		Tenant
Improvements: Tenant is in the process of making certain improvements to the Premises.
All such improvement constructed by Tenant shall be done in a first-class, workmanlike
manner.

	 	
General
Contractor:

	 	
(a)
Landlord has approved Tenant’s plans and the selection of Golden & Associates Construction
as the general contractor to complete Tenant Improvements in accordance with the approved
plans and specifications.

	 	
(b)
Tenant and/or Tenant’s contractors and subcontractors shall be required to provide, in
addition to the insurance required to be maintained by Tenant pursuant to this Lease, the
following types of insurance and the following minimum amounts naming Landlord as an
additional insured.

	  	(i)
Workmen’s compensation coverage with limits of at least $500,000.00 for the employer’s
liability coverage thereunder or statutory limits.

	  	(ii)
Builder’s Risk-Completed Value fire and extended coverage covering damage to the
construction and improvements to be made by Tenant in amounts at least equal to the
estimated completed cost of said construction and improvements.

	 	     
Original
or duplicate policies for all of the foregoing insurance have been delivered to Landlord.
In all other respects the insurance covering above-mentioned shall comply with the
provisions of the Lease.

	 	
(c)
Tenant hereby assumes any and all liability including any arising out of statutory or
common law for any and all injuries to or death of any and all persons, including
Tenant’s contractors and subcontractors and their employees and any liability for any and
all damage to property caused by, or resulting from, or arising out of any act or
omission on the part of the Tenant, its contractors and its or their subcontractors or
employees in the performance of Tenant’s work and agrees to defend indemnify and save
harmless Landlord from and against all damages, costs, liabilities, losses and/or
expenses (including legal fees and expenses which Landlord may incur, suffer or pay as
the result of claims or lawsuits due to, because of, or arising out of any and all such
injuries, death and/or damage. Tenant agrees to insure the foregoing assumed contractual
liability and deliver to Landlord evidence that it has obtained said contractual
liability coverage.

	 	
(d)
If, because of any act or omission (or alleged act or omission) of Tenant, any mechanics
or other lien, charge, order or encumbrance is valid or enforceable as such shall be
filed against the Premises or the Center, Tenant shall, at its costs and expense, cause
same to be discharged of record or bonded within ten (10) days after notice to Tenant of
the filing thereof; and Tenant shall indemnify and save harmless Landlord against and
from all costs, liabilities, suits, penalties, claims and demands, including reasonable
attorneys’ fees resulting therefrom. If Tenant fails to comply with the foregoing
provisions, Landlord shall have the option of discharging or bonding any such lien,
charge, order or encumbrance, and Tenant agrees to reimburse Landlord for all costs,
expenses and other sums of money in connection therewith (as additional rental). All
materialmen, contractors, artisans, mechanics or laborers and any other persons now or
hereafter contracting with Tenant for the furnishing of labor, services, materials,
supplies or equipment with respect to any portion of the demised Premises at any time
from the date thereof until the end of the Term, are hereby charged with notice that they
must look exclusively to Tenant to obtain payment for same. Landlord shall not perform
any work for Tenant without written authorization by Tenant together with payment by
Tenant in advance for such work.

	 	
(e)
It shall be Tenant’s responsibility to cause each of Tenant’s contractors and
subcontractors to maintain continuous protection of the Premises in the Building.

	 	
(f)
Contractors and/or subcontractors participating in the Tenant Improvements shall be
required to remove and dispose of as necessary or as Landlord may direct, all debris,
rubbish of whatever kind remaining in the Building or in proximity thereto which was
brought in or created by the performance of the Tenant Improvements. If at any time
Tenant’s contractors and/or subcontractors shall neglect, refuse or fail to remove any
debris, rubbish, surplus materials or temporary structures within 24 hours after written
notice to Tenant, Landlord may remove the same at Tenant’s expense.

	 	
(g)
Each of the contractors and/or subcontractors participating in the Tenant Improvements
shall guarantee in writing that the work done by it will be free from any defects in
workmanship and materials for a period of not less than one (1) year from the date of
completion and acceptance thereof. Tenant shall require and furnish Landlord evidence
that any such contractors and/or subcontractors shall be responsible for the replacement
or repair without additional charge to Landlord of any and all work done or furnished by
or through such contractors and/or subcontractors which becomes defective within one (1)
year after completion, or such longer period as may be specified in any contract for
construction. Replacement or repair of such work shall include without additional charge
to Landlord all expenses and damages in connection with such removal, replacement of all
or any part of the work or any part of the Building which may be damaged or disturbed
thereby. All warranties or guarantees as to materials or workmanship or their respect to
Tenant’s work shall be contained in the contract or subcontract shall provide that said
guarantees or warranties shall inure to the benefit of both Landlord and Tenant and may
be directly enforced by either of them.

	 	
Landlord
Contribution: Landlord does hereby grant to Tenant an allowance of Nine and 00/100
Dollars ($9.00) per square foot of floor area in the Demised Premises (said amount herein
referred to as the “Landlord’s Contribution”) to be paid by Landlord to Tenant toward the
completion of the Tenant Improvements as contained in this Lease. Landlord shall pay
Tenant upon completion of Tenant Improvements, but no later than August 31, 2000, upon
receipt of documentation of the total cost of the Tenant Improvements which has been
projected to be approximately $1.5 million.

		3. 		Expansion:
Tenant shall be granted an option to expand into approximately 10,800 s.f. located at
2192 Suite G and 7,200 s.f. located at 2192 Suite F (Expansion Area). Expiration and
Tenant’s written notification date are shown below:

	 	 Suite #	Current
Lease Expiration	Tenant’s Written
Notification Date
	 	2192-F	May 31, 2002	August 31, 2001
	 	 2192-G 	October 31, 2002	January 31, 2002

	 	
Upon
Landlord acceptance of Tenant’s written notification for its desire to expand on or
before the dates set forth above, Landlord agrees to use commercially reasonable efforts
to deliver the Expansion Area to Tenant on the expiration of the current lease term as
set forth above. Within 30 days after occupancy of either of the Expansion Areas,
Landlord agree to provide Tenant with a $2.50 per square foot allowance toward the cost
of making tenant improvements in the Expansion Area and Tenant shall receive two (2)
months free rent for each Expansion Area. The fixed minimum rent of the Expansion Area
shall commence at $8.17 per square foot and shall escalate three percent (3%) annually
over the previous years rental. The Expansion Area’s lease term shall expire concurrently
with the term of the Lease on June 30, 2010. All other terms and conditions contained in
the Lease shall apply to the Expansion Area.

		4. 		Option
to Renew: Provided Tenant is not then in default under the terms of the Lease, Tenant
shall have a one (1) option to renew the Lease for an additional term of five (5) years
upon giving written notice to Landlord at least nine (9) months prior to June 30, 2010,
such renewal to be upon the existing terms and conditions contained in the Lease at a
mutually agreed upon rental rate. If a mutually agreed upon rental rate is not agreed
within six (6) months of the lease expiration of June 30, 2010 the option to renew shall
become null and void and the Lease shall terminate on June 30, 2010. In the event Tenant
exercises said option, Landlord shall professionally clean the floors and repaint the
walls with material equivalent in quality and quantity to those installed or used in the
initial Tenant finish. At Tenant’s option, Landlord shall reimburse Tenant the cost to
professionally clean the floors and repaint the walls, in lieu of performance of such
work on Tenant’s behalf.

		5. 		Early
Termination: Provided Tenant is not then in default, Tenant shall have the one time right
to terminate the lease on June 30, 2008 by paying to Landlord the unamortized portion of
the tenant improvements allowance and leasing commission costs associated with this
Lease, as such amount is determined in accordance with Exhibit E, ( “Early Termination
Fee” ). Said tenant improvement allowance and leasing commission costs ( “Expansion
Costs” ) shall be calculated by a level amortization over the ten (10) year primary term.
Tenant must notify Landlord in writing of its intent to terminate the Lease not less than
two hundred seventy (270) days prior to June 30, 2008.

		6. 		Lease
Commission: Landlord agrees to compensate Corporate Realty Associates, Inc., as Tenant’s
broker, a lease commission in the amount of two percent (2%) of the gross lease value for
50,150 s.f. less the remaining value of Tenant just terminated lease dated January 17,
1992. Landlord shall pay this lease commission upon receipt of Tenant’s first month’s
rent under the Lease.

		7. 		Additional
Security: In addition to all Landlord’s liens provided by law of the State of Alabama,
Tenant shall collaterally assign to Landlord, as additional security for the payment of
rent, and performance of other obligations undertaken by Tenant in this lease, United
States Treasury securities with a market value of not less than Five Hundred Twenty
Thousand and No/100 Dollars ($520,000). The Treasury Securities shall be deposited in an
escrow account at __________________ pursuant to the terms of a mutually acceptable
escrow agreement. Provided Tenant is not in default under this lease, Landlord shall
release from escrow at the end of each lease year a portion of said United States
Treasury securities so long as the remaining securities have a then current market value
of no less than as follows:

	                    Lease Year	Market Value
	  	July 1, 2000 - June 30, 2001	 	$520,000.00	 
	  	July 1, 2001 - June 30, 2002	 	$455,000.00	 
	  	July 1, 2002 - June 30, 2003	 	$390,000.00	 
	  	July 1, 2003 - June 30, 2004	 	$325,000.00	 
	  	July 1, 2004 - June 30, 2005	 	$260,000.00	 
	  	July 1, 2005 - June 30, 2006	 	$195,000.00	 
	  	July 1, 2006 - June 30, 2007	 	$130,000.00	 
	  	July 1, 2007 - June 30, 2008	 	$65,000.00	 
	  	July 1, 2008 - June 30, 2009	 	-0-	 

	 	
The
form and substance of said escrow agreement must be acceptable in every respect to
Landlord and Landlord’s attorney. Tenant recognizes that Landlord intents to assign its
rights in and to the proceeds of the escrow account as additional collateral to a lending
institution to collaterize a loan to enable Landlord to obtain the funds required to be
made available to Tenant by Landlord relating to this Lease. Tenant shall co-operate with
Landlord’s lender to enable it to receive an appropriate assignment of Landlord’s
interest in such escrow account.

	 	
In
the event of a sale or transfer of the Center or any portion thereof that includes the
Premises, Landlord shall assign its rights in the escrow account to the purchaser and
thereafter be entirely relieved of any obligation to return the proceeds of such account
to Tenant.

		8. 		Non-Disturbance:
Tenant shall receive non-disturbance agreements from present or any future mortgagees or
holders of other superior interests, if any.

		9. 		Signage:
Landlord shall permit Tenant to install a monument sign on the property at a location to
be designated by Landlord. Said signage shall conform to City of Hoover and the
Riverchase Architectural Committee and shall be the sole cost and expense of Tenant.

		10. 		Pest
Control: Landlord agrees to maintain a service contract for termite treatment to
2190/2192 Riverchase Business Park throughout its lease term. Landlord will use its best
commercially reasonable efforts to remedy any termite infestation within twenty four (24)
hours of notification by Tenant.

		11. 		Exterior
Lighting: Landlord, at its sole cost and expense, shall install additional exterior
lighting in the parking areas. Tenant requests Landlord to present the upgraded plan for
exterior lighting to Tenant for its review prior to seeking approval from the Riverchase
Architectural Committee, if required.

		12. 		Suite
K: Landlord agrees, at its sole cost and expense, to repair the following items located
in Suite K consisting of 7,200 square feet:

		 		i)	Reinstall
a portion of the concrete floor located in the front left portion (22 ft. by 33 ft.).
Estimated cost of $4,038.00

		 		ii)	Recaulk,
as needed, the joints of the concrete, tilt-up, exterior wall panels. Estimated cost
$344.00

		 		iii)	Remove
two vents that penetrate the roof and install roof caps, Estimated cost $1,785.00.

	

“EXHIBIT E”

Tenant Improvements
and Leasing Commissions

	Lease	Size	Tenant
Improvement Allowance	Leasing
Commissions
	

	Current Lease	 	50,150 s.f.	 	$451,350.00	 	$141,493.50	 
	Expansion - 2192 F 1)	 	7,200 s.f.	 	$18,000.00	 	$10,677.36	 
	Expansion - 2192 G 1)	 	10,800 s.f.	 	$27,000.00	 	$14,667.30	 

	

1) Expansion Costs will not be
included in the Early Termination Fee in the event Tenant does not exercise its option to
expand as contained in Exhibit D, Paragraph Three (3).<PAGE>   1
                                                                   EXHIBIT 10.16

                                LICENSE AGREEMENT

                                     BETWEEN

                              ALLERGAN SALES, INC.
                              ALLERGAN SALES, LTD.

                                       AND

                           ISTA PHARMACEUTICALS, INC.

                                 March 29, 2000

<PAGE>   2

                                LICENSE AGREEMENT

                                     BETWEEN

                              ALLERGAN SALES, INC.
                              ALLERGAN SALES, LTD.

                                       AND

                           ISTA PHARMACEUTICALS, INC.

                                 March 29, 2000

<PAGE>   3

                                LICENSE AGREEMENT

        THIS LICENSE AGREEMENT dated March 29, 2000 ("Effective Date"), is by
and between Allergan Sales, Inc., a California corporation, and Allergan Sales,
Ltd., an Ireland corporation, (collectively, "Allergan" as defined in Section
1.3 below), with principal offices at 2525 Dupont Drive, Irvine, California
92612 and Ista Pharmaceuticals, Inc., a California corporation, with principal
offices at 15279 Alton Parkway, Suite 100, Irvine, California 92618 ("Ista").

                                    RECITALS

        WHEREAS, Ista has developed and holds patents and patent applications on
a pharmaceutical formulation containing Hyaluronidase used in the treatment of
ophthalmic diseases, trademarked as "Vitrase(R)"; and

        WHEREAS, Ista is currently conducting clinical studies for use in
obtaining Federal Food and Drug Administration approval of Vitrase(R) for the
treatment of vitreous hemorrhage; and

        WHEREAS, Ista desires to grant, and Allergan desires to obtain exclusive
licenses to market, distribute and sell Vitrase(R) in accordance with the terms
and conditions of this Agreement;

        NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants set forth below, Allergan and Ista mutually agree as follows:

1. DEFINITIONS. In addition to the terms defined in the provisions of the
Agreement, the following terms shall have the meaning ascribed below:

        1.1 "Affiliate" means any entity which controls, is controlled by or is
under common control with another entity. An entity is deemed to be in control
of another entity (controlled entity) if the former owns directly or indirectly
at least the lesser of (a) fifty percent (50%), or (b) the maximum percentage
allowed by law in the country of the controlled entity, of the outstanding
voting equity of the controlled entity. "Controlled Affiliate" shall mean an
entity that is controlled by a party to this Agreement.

        1.2 "Agreement" means this Agreement, as may be amended, including all
Appendices and Exhibits attached hereto.

        1.3    "Allergan" means Allergan Sales, Inc., for purposes of rights in
the United States and Allergan Sales, Ltd., for purposes of rights outside the
United States.

        1.4 "Confidential Information" means information disclosed in writing by
one party to the other pursuant to this Agreement and identified as
"CONFIDENTIAL" as well as information disclosed orally to the extent such oral
disclosure is reduced to writing and is identified as "CONFIDENTIAL" and which
is provided to the other party within thirty (30) days after oral disclosure.
"Confidential Information" does not include any of such information which:

               (a) is known to the receiving party before receipt thereof under
this Agreement, or is independently developed by the receiving party without
recourse to the other party's Confidential Information, as evidenced by the
receiving party's written records;

<PAGE>   4

               (b) is disclosed to the receiving party without restriction after
full execution of this Agreement by a Third Party having a legal right to make
such disclosure;

               (c) is or becomes part of the public domain through no breach of
this Agreement; or

               (d) is required to be disclosed by law or regulation.

        1.5 "Credit Agreement" means the Credit Agreement to be entered into,
once the California Department of Corporations issues the appropriate permit,
between an Allergan Affiliate and Ista, and all related agreements, as may be
amended by the parties.

        1.6 "Development Plan" means the development plan to include all the
necessary development, clinical trials and regulatory filings to support an NDA
and obtain FDA and EMEA approval of the Product as set forth in Section 3.2(a),
as attached as Appendix 1.6, as well as establish Proof of Concept for
Proliferative Diabetic Retinopathy.

        1.7 "EMEA" means the European Medicines Evaluation Agency or any
successor entity thereto.

        1.8 "FDA" means the United States Food and Drug Administration or any
successor entity thereto.

        1.9 "Field" means all ophthalmic uses in the posterior region of the
eye, defined as the rear two thirds of the eyeball (behind the lens) including
the vitreous, retina, optic disc, choroid, pars plana and the portion of the
sclera behind the lens.

        1.10 "First Commercial Sale" means the first sale for use of a Product
in any country of the Territory after Marketing Approval.

        1.11 "Hyaluronidase" means enzymes which cleave the glycosidic bonds of
any Polysaccharide or Glycosaminoglycans such as Hyaluronic Acid and Chondroitin
Sulfate and includes enzyme formulations containing one or more of
Beta-hyaluronidase and Annexin II.

        1.12 "Improvements" means any and all developments, inventions or
discoveries in the Field relating to the Licensed Technology developed, or
acquired with the right to sublicense to Allergan as provided for herein, by
Ista at any time and shall include, but not be limited to, developments intended
to enhance the safety and/or efficacy of the Product, or a new delivery system,
combination product or new formulation, provided such modified Product contains
Hyaluronidase.

        1.13 "Ista Trademarks" means the trademarks, and any goodwill associated
with such trademarks, listed on Appendix 1.13 hereto, and all applications and
registrations therefor.

        1.14 "Joint Operating Committee" means the joint committee composed of
representatives of Ista and Allergan described in Section 2.3(a) hereof.

        1.15 "Licensed Know-How" means of Ista's and its Affiliates' rights
existing as of the Effective Date in and to all confidential information, trade
secrets, research and results thereof,

                                       2
<PAGE>   5

technology, know-how, discoveries, developments, improvements, techniques, data,
methods, processes, instructions, formulae, drawings and specifications relating
to the research, development, manufacture, registration, marketing or sale of
the Products in the Territory, including without limitation, and with respect to
the Products in the Territory. Notwithstanding the foregoing, Allergan shall
have no rights with respect to Licensed Know-How regarding manufacturing of
Product (i) until Allergan has the right to manufacture the Product pursuant to
the Supply Agreement or Section 12.5(e) hereof, or (ii) as specifically set
forth in Section 4.1.

        1.16 "Licensed Patents" means:

               (a) the patents and patent applications set forth in Appendix
1.16 and any patents or patent applications covering the Product, and its method
of manufacture and use, now owned or acquired during the Term of this Agreement
by Ista or under which Ista has the right to grant sublicenses in accordance
with this Agreement during the term of this Agreement in the Territory including
any covering Improvements;

               (b) all patents arising from such applications identified in (a)
and any divisions, continuations, and continuations-in-part identified in (a);

               (c) any extension, renewal, re-examination or reissue of a patent
identified in (a) or (b).

        1.17 "Licensed Technology" means the Licensed Know-How and the Licensed
Patents.

        1.18 "Loan Indebtedness" means the aggregate principal amount owed by
Ista to Allergan under the Credit Agreement.

        1.19 "Major Market" shall mean each of Australia, Brazil, Canada,
France, Germany, Italy, Spain, United Kingdom and United States.

        1.20 "Marketing Approval" shall mean the final approval in a country
from all necessary regulatory agencies to market the Product in such country
including any requisite pricing approvals.

        1.21 "Marketing Plans" shall have the meaning set forth in Section 9.1.

        1.22 "NDA" means an application filed with the FDA for approval by the
FDA of the sale of the Product in the United States, whether such application is
characterized as a New Drug Application or otherwise.

        1.23 "Net Sales" means the total amount invoiced to Third Parties in
connection with the sales of the Product in all of its final packaged forms by
Allergan, its sublicensees or its Affiliates in the Territory, less, to the
extent actually incurred:

               (a) allowances and adjustments credited or payable, including
credit for damaged, outdated and returned products;

               (b) trade, cost or quantity discounts earned or granted;

               (c) transportation charges (including insurance costs), sales
taxes, excise taxes and duties, and other similar charges;

                                       3
<PAGE>   6

               (d) wholesaler chargebacks;

               (e) Medicare, Medicaid and other rebates and management fees
mandated, earned or granted; and

               (f) taxes on sale, transportation or use paid by Allergan.

        Net Sales shall be calculated in accordance with Allergan's standard
internal policies and procedures. Any discount, allowance, rebate, management
fee or wholesaler chargeback for the Product which is given to a customer due to
the purchase of a product other than the Product or due to the purchase of any
service, shall not be taken into consideration for the calculation of Net Sales.
Net Sales shall not include sales by Allergan to its Affiliates or sublicensees
for resale, provided that if Allergan sells the Product to an Affiliate or
sublicensee for resale, Net Sales shall include the amounts invoiced by such
Affiliate or sublicensee to Third Parties on the resale of such Product. A
"sale" shall also include a transfer or other disposition for consideration
other than cash, in which case such consideration shall be valued at the fair
market value thereof

        1.24 "Preferred Stock Purchase Agreement" means the Preferred Stock
Purchase Agreement between an Allergan Affiliate and Ista, dated the date
hereof, and all related agreements, as may be amended by the parties.

        1.25 "Product" means any therapeutic composition containing
Hyaluronidase coming within the scope of the Licensed Patents regardless of
form, dose or package.

        1.26 "Profit Payments" mean the consideration paid by Allergan to Ista
for sale of Products in the United States as set forth in Section 6.2 hereof.

        1.27 "Proof of Concept for Proliferative Diabetic Retinopathy" means
satisfaction of the conditions set forth in Appendix 1.27.

        1.28 "Regulatory Dossiers" means all registrations, permits licenses,
authorizations, approvals, presentations, notifications or filings (together
with all applications therefor), which are filed with or granted by the
governing health authority of any country, as well as the EMEA and which are
required to develop, make, use, sell, import or export the Product.

        1.29 "Royalties" means the consideration paid to Ista by Allergan for
sales of Product in the Territory (except in the United States) as set forth in
Section 6.1 hereof.

        1.30 "Supply Agreement" means the Supply Agreement between Allergan and
Ista, dated the date hereof, and all related agreements, as may be amended by
the parties.

        1.31 "Territory" means all of the countries of the world, except Mexico
and Japan. Upon expiration or termination of Ista's existing distribution
agreement and trademark license agreement in Mexico, but not later than April
25, 2004, Mexico shall be added to the Territory.

        1.32 "Third Party" means any individual, corporation, partnership, trust
or other business organization or entity, and any other recognized organization
other than the parties hereto and their Affiliates.

                                       4
<PAGE>   7

        1.33 "Trademark License" means the exclusive license to the Ista
Trademark(s) in the Territory as described in Section 5.1 hereof.

        1.34 "United States" means the United States of America and its
territories and possessions, including the commonwealth of Puerto Rico.

        1.35 "Valid Patent Claim" means with respect to the Product any claim of
any issued and unexpired patent included within the Licensed Patents which has
not been held revoked, unenforceable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unless and until
reinstated, and which has not been admitted to be invalid or unenforceable.

2. INTER-RELATED AGREEMENTS

        2.1 Equity Investment. As set forth in the Preferred Stock Purchase
Agreement, an Allergan Affiliate shall purchase 1,776,199 shares of Series D
Preferred Stock of Ista, at a purchase price of $5.63 per share, for
$10,000,000.

        2.2 Credit Line. As set forth in, and subject to the terms of, the
Credit Agreement (as well as approval by the California Department of
Corporations), an Allergan Affiliate shall make available to Ista a secured line
of credit, initially up to $10,000,000 upon which Ista may draw for the sole
purpose of funding development, clinical and regulatory work on the Product and
Improvements, including as set forth in Section 3 and the Development Plan.
After filing of the NDA for the Product in the United States, Ista may draw up
to an additional $2,500,000 (which $2,500,000 may be in addition to any amounts
drawn for work on the Product) for general corporate purposes. As set forth
below in Section 7.1, upon the achievement of a certain milestone, a portion of
the outstanding principal owed by Ista to the lender under the Credit Agreement
shall be forgiven by lender.

        2.3 Supply Agreement. As set forth in the Supply Agreement, Ista shall
supply all of Allergan's requirements of Product for commercial sale.

3. CLINICAL RESEARCH, REGULATORY MATTERS, JOINT OPERATING COMMITTEE

        3.1 Joint Operating Committee.

               (a) Formation and Composition. A joint committee comprised of an
equal number of representatives each of Allergan and of Ista (the "Joint
Operating Committee") shall be appointed promptly after the date hereof and
shall meet as needed, but not less than once each quarter. Unless the parties
otherwise agree, each party shall be entitled to two (2) representatives on the
Joint Operating Committee. Such meetings shall be at such times agreed to by
Ista and Allergan, at such locations or in such other form (e.g. telephone or
video conference) as the members of the Joint Operating Committee shall agree.
Each party shall bear its own personnel, travel, and lodging expenses relating
to Joint Operating Committee meetings. A party may change one or more of its
representatives to the Joint Operating Committee at any time. Members of the
Joint Operating Committee may be represented at any meeting by another member of
the Joint Operating Committee, or by a deputy. Either party may permit
additional employees and consultants to attend and participate (on a non-voting
basis) in the Joint Operating Committee meetings, subject to the confidentiality
provisions of Section 13. Any approval, determination or other action agreed to
by

*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

                                       5
<PAGE>   8

all of the members of the Joint Operating Committee or their deputies present at
the relevant Joint Operating Committee meeting shall be the approval,
determination or other action of the Joint Operating Committee, provided that at
least one representative of each Party is present at such meeting. The Joint
Operating Committee shall be chaired by an Allergan and Ista representative to
the committee in an alternating manner.

               (b) Joint Operating Committee Functions and Powers. The Joint
Operating Committee shall be responsible for the coordination of regulatory
filings and oversight of further development and marketing of Product. The
specific functions of the Joint Operating Committee shall be to: (i) recommend
the specific goals for the Development Plan, (ii) discuss the Development Plan
and recommend priorities thereunder, (iii) monitor the progress and results of
the Development Plan, (iv) consider and recommend necessary or desirable
amendments to the Development Plan, (v) review the objectives and strategies of
the Marketing Plans and other marketing information provided by Allergan; (vi)
monitor the progress of the parties toward those objectives; (vii) consider and
recommend necessary or desirable amendments to the Marketing Plans; and (viii)
undertake and/or approve such other matters as are provided for the Joint
Operating Committee under this Agreement.

               (c) Minutes and Reports. The Joint Operating Committee shall be
responsible for keeping accurate minutes of its deliberations which record all
proposed decisions and all actions recommended or taken. Within thirty (30) days
of each meeting, the Chair shall provide the parties with minutes of such
meeting and a written report describing in reasonable detail, a summary of the
work and progress to date, any issues requiring resolution and any proposed
decisions and actions taken to all members of the Joint Operating Committee. All
records of the Joint Operating Committee shall be available to both parties.

               (d) Dispute Resolution. . If the Joint Operating Committee is
unable to decide or resolve an issue unanimously, the issue shall be referred to
the Chief Executive Officers of Allergan and Ista (or their respective executive
officer level designees). Such officers of the parties will meet promptly
thereafter and shall negotiate in good faith to resolve such issue.

        3.2 Product Development, Clinical Research, Regulatory Matters and
Technical Marketing Support.

               (a) Ongoing Product Development and Clinical Research. In
accordance with the Development Plan and subject to the guidance of the Joint
Operating Committee, Ista shall conduct, at its expense and in a timely manner,
all product development, pre-clinical studies and clinical research in support
of FDA, EMEA and other regulatory approvals of the Product, as Ista and Allergan
shall mutually agree, for treatment of vitreous hemorrhage. In addition, Ista
shall conduct, at its expense and in a timely manner, all pre-clinical studies
and clinical research to (i) support the use of the Product for (A) treatment of
moderate vitreous hemorrhage, and (B) retreatment of previously treated eyes,
and (ii) demonstrate Proof of Concept for Proliferative Diabetic Retinopathy.

               (b) Regulatory Approvals in the United States and the European
Community. In accordance with the Development Plan, Ista shall use commercially
reasonable efforts and diligence, at its expense and in a timely manner, to
apply for and obtain regulatory approval of the Product in the United States and
each country of the European Community (through a centralized filing with the
EMEA). In carrying out its regulatory activities, Ista shall consult with
Allergan, through the Joint Operating Committee, and Allergan shall assist Ista
in obtaining approval of the NDA currently

                                       6
<PAGE>   9

pending at the FDA and provide reasonable assistance to Ista as may be necessary
in obtaining approval of such NDA and other regulatory approvals as provided for
herein. Ista shall promptly provide to Allergan copies of all material
correspondence received from, and written summaries of material telephone
conversations with, the FDA and other regulatory agencies and EMEA relating to
the prosecution of the regulatory approvals. All filings with or correspondence
to the FDA or other regulatory agencies and EMEA to be made by Ista shall first
be provided to Allergan for approval, which approval shall not be unreasonably
withheld or delayed. Ista shall give Allergan reasonable advance notice of any
meetings or telephone conferences with representatives of the FDA or other
regulatory agencies relating to the prosecution of the regulatory approvals in
order to allow Allergan an opportunity to attend any such meeting or participate
in such telephone. Any disagreement between the parties shall be referred to the
Joint Operating Committee for resolution.

               (c) Regulatory Approvals Outside the United States and the
European Community. Allergan may, at its expense, apply for and obtain
regulatory approvals of the Product in such countries outside the United States
and the European Community as it deems appropriate in light of the market
potential of the Product, taking into account the competitiveness of the
marketplace, the proprietary position of the Product, the regulatory structure
involved, the profitability of the Product and other relevant factors. In
carrying out its regulatory activities Allergan shall consult with Ista, through
the Joint Operating Committee. If requested by Ista, Allergan shall (i) provide
to Ista copies of material correspondence received from, and written summaries
of material telephone conversations with, regulatory agencies relating to the
prosecution of the regulatory approvals, (ii) provide to Ista for approval,
which approval shall not be unreasonably withheld or delayed, filings or
correspondence to be made by Allergan, and (iii) give Ista reasonable advance
notice of any meetings or telephone conferences with representatives of the
regulatory agencies relating to the prosecution of the regulatory approvals in
order to allow Ista to attend such meetings or participate in such telephone
conversations. At Allergan's election, any of such regulatory approvals shall be
owned by Allergan. Ista shall reasonably cooperate with Allergan in obtaining
such approvals and shall supply such information and reports it has possession
of in support of the filings for such regulatory approvals. Any disagreement
between the parties shall be referred to the Joint Operating Committee for
resolution.

               (d) Additional Development. If Allergan desires preclinical or
clinical studies in addition to that set forth in this Section 3.2 and the
Development Plan for expanded label indications for the Product within the
Field, then Allergan shall notify Ista in writing and include a preliminary
preclinical or clinical plan. Through the Joint Operating Committee, the parties
will determine whether or not to proceed with such work and the allocation of
such work and the expenses therefor. In the absence of a mutual agreement,
either party may conduct such work at its expense, and the other party shall
reasonably cooperate to the extent such cooperation does cause such party to
incur any material additional expenses.

               (e) Data. Ista shall maintain records in sufficient detail and in
good scientific manner appropriate for patent and regulatory purposes and shall
properly reflect all work done and results achieved in the performance of the
Development Plan (including all data in the form required to be maintained under
any applicable governmental regulations), and any subsequent preclinical or
clinical studies. Such records shall include books, records, reports, research
notes, charts, graphs, comments, computations, analyses, recordings,
photographs, computer programs and documentation thereof, computer information
storage means, samples of materials and other graphic or written data generated
in connection with the research and development activities. Allergan has the
right to inspect such records, and Ista shall provide copies of all requested
records, to the extent reasonably

                                       7
<PAGE>   10

required for the exercise of Allergan's rights under this Agreement: provided,
however, that Allergan shall maintain such records and the information of Ista
contained therein in confidence in accordance with Section 13 below and shall
not use such records or information of Ista except to the extent otherwise
permitted by this Agreement.

4. LICENSE FOR LICENSED TECHNOLOGY

        4.1 License Grant. Ista hereby grants to Allergan and its Affiliates an
exclusive license, with the right to sublicense, under the Licensed Technology,
to use, market, distribute, offer to sell and sell the Product in the Field in
the Territory. The rights to manufacture and have manufactured shall arise only
under the Supply Agreement and Section 12.5(e) hereof. Ista acknowledges that
prior to Allergan having such right to manufacture or have manufactured Product,
pursuant to Section 5.5 of the Supply Agreement, Allergan may use the Licensed
Technology to develop manufacturing capabilities either internally or at a Third
Party. The right to sublicense to a Third Party shall be at the sole discretion
of Allergan, but Allergan shall provide prompt notice of all such sublicenses.

        4.2 Delivery of Licensed Technology. Ista shall promptly furnish to
Allergan copies of such written documents in the possession of Ista or its
Controlled Affiliates that embody the Licensed Technology that are reasonably
necessary to enable Allergan to register (if required), distribute, market,
promote, advertise and sell the Products for use in the Field. To the extent
that Allergan has the right pursuant to the Supply Agreement, such documents
shall include those reasonably necessary to enable Allergan to manufacture or
have manufactured the Product. Allergan shall promptly acknowledge, in writing,
receipt of such materials, and shall maintain such records and the information
of Ista contained therein in confidence in accordance with Section 13 below and
shall not use such records or information of Ista except to the extent permitted
by this Agreement or the Supply Agreement.

        4.3 Restrictions. During the term of this Agreement, Ista and its
Affiliates shall not, directly or indirectly, market or sell: (i) any product
for use in the Field which contains Hyaluronidase in the Territory nor shall
they manufacture, market or sell such products for or to any person or entity
(other than Allergan or an Affiliate of Allergan) which Ista or any of its
Affiliate knows or has reason to believe shall use or sell such product in the
Territory for use in the Field; (ii) any product which may be legally used as a
substitute for the Product for use in the Field in the Territory, nor shall they
manufacture, market or sell such products for or to any person or entity (other
than Allergan or an Affiliate of Allergan) which Ista or any of its Affiliates
knows or has reason to believe shall use or sell such product in the Territory
for use in the Field; or (iii) Hyaluronidase bulk substance to any person or
entity (other than Allergan or an Affiliate of Allergan) which Ista or any of
its Affiliates knows or has reason to believe shall use such bulk substance to
make any product for use in the Field for sale in the Territory. During the term
of this Agreement, Allergan and its Affiliates shall not, directly or
indirectly, market or sell any product for the treatment of vitreous hemorrhage
or any product containing Hyaluronidase for the treatment of diabetic
retinopathy, other than the Product. The parties agree that Ista's "Keratase"
and Cornealplasty products (the names of which may be changed pending FDA
approval) are expressly excluded from this provision, provided that such
products are not approved for administration by intravitreal injection, are not
sold with an equivalent Hyaluronidase unit dose and delivery volume as the
Product, are contraindicated for intravitreal injection and are not sold to any
person or entity (other than Allergan of an Affiliate of Allergan) which Ista or
any of its Affiliates knows or has reason to believe shall use or sell such
product in the Territory for use in the Field.

                                       8
<PAGE>   11

5. LICENSE FOR TRADEMARKS

        5.1 License Grant. In connection with its promotion, marketing,
distribution and sale of Product, Ista hereby grants to Allergan and its
Affiliates an exclusive, royalty-free license, with the right to sublicense,
during the term of this Agreement and subject to Section 5.6, to use the Ista
Trademark(s) in the Territory on all labels, advertisements, promotional
materials and literature for the Product.

        5.2 Acknowledgement. Allergan acknowledges that: (i) the Ista
Trademark(s) are owned exclusively by Ista; (ii) that Allergan has no right,
title or interest in and to the Ista Trademark(s), except the rights conferred
by this Agreement; and (iii) that all goodwill associated with the Ista
Trademark(s) inures to the benefit of Ista.

        5.3 Registration. Ista agrees to obtain and maintain the Ista
Trademark(s), at its own expense, in those countries listed in Exhibit 5.3,
including the preparation and recordation of registered user agreements and/or
licenses necessary or reasonably deemed necessary by Allergan in order to comply
with local laws.

        5.4 Use of Trademark(s). The Products shall bear the trademark
Vitrase(R) for distribution and sale (i) within the United States and Canada
unless the Joint Operating Committee otherwise determines, or (ii) outside the
United States, unless Allergan has a bona fide reason to use another mark, after
consultation with the Joint Operating Committee (which other mark shall be owned
by Allergan).

        5.5 Infringements. Allergan shall promptly call to the attention of Ista
the use by any Third Party of the Ista Trademark(s) or any trademark(s) similar
to the mark covered by this Agreement, of which it may become aware and which it
may consider to be an infringement or passing off of the Ista Trademark(s) or
unfair competition. Ista shall have the right to decide whether or not to bring
proceedings against Third Parties. Such proceedings shall be at the expense of
Ista. Allergan shall cooperate fully with Ista to whatever extent is deemed
reasonably necessary by Ista to prosecute such action. In the event that Ista
recovers damages from prosecution of such action, Ista shall retain all amounts
received for such damages except that Allergan shall be entitled to
reimbursement of its costs, expenses, and attorneys' fees attributable to such
action (or in proportionate amounts thereof should Ista recover an insufficient
amount for both parties' such costs and expenses). Ista shall not settle or
compromise any suit for infringement without the express approval of Allergan,
such approval not to be unreasonably withheld. In the event Ista decides not to
prosecute, and Allergan reasonably determines that the failure to prosecute
would adversely affect the rights of Allergan under this Agreement, Allergan
shall have the right, but not the obligation, to prosecute such action at its
own expense. Ista shall cooperate fully with Allergan to whatever extent is
deemed reasonably necessary by Allergan to prosecute such action. In the event
that Allergan recovers its damages from prosecution of such action, Allergan
shall retain amounts received for such damages except that Ista shall be
entitled to reimbursement of its costs, expenses, and attorneys' fees
attributable to such action (or in proportionate amounts thereof should Allergan
recover an insufficient amount for both parties' such costs and expenses).
Allergan shall not settle or compromise any suit for infringement without the
express approval of Ista.

        5.6 Term and Termination. The term of this Trademark License shall be
the Term specified in Section 12 of this Agreement. Upon termination of this
Agreement: (i) Allergan shall discontinue all use of the Ista Trademark(s)
inside the United States and shall not thereafter adopt a mark which is
confusingly similar; and (ii) Ista shall grant Allergan a royalty-free,
exclusive license

                                       9
<PAGE>   12

to the Ista Trademark(s) for use on all labels, advertisements, promotional
material and literature for the Product in countries where Allergan is using the
Ista Trademark, but excluding the United States.

6. ROYALTIES, PROFIT SPLIT.

        6.1 Royalties on Net Sales Outside the United States.

               (a) Initial Royalty Rate. With respect to sales of Product inside
the Territory but outside the United States, Allergan shall pay Ista a royalty
of [*] of Net Sales of Product, subject to adjustment as set forth in this
Section 6.1, less the cost of Product for sale outside the United States
purchased by Allergan from Ista pursuant to the Supply Agreement. The credit for
cost of Product purchased by Allergan from Ista pursuant to this Section 6.1(a)
shall be applied in the calendar quarter in which such purchases were made. To
the extent any such credits exceed the royalty due for such quarter, such excess
shall be carried forward to successive calendar quarters until fully utilized

               (b) Adjustments for Proof of Concept, Sales Levels. If Proof of
Concept for Proliferative Diabetic Retinopathy is not achieved by December 31,
2003, the royalty rate in Section 6.1 (a) shall be adjusted to [*] of Net Sales
for sales invoiced after December 31, 2003. Notwithstanding the foregoing, in
the event that either (i) Proof of Concept for Proliferative Diabetic
Retinopathy is achieved, or (ii) Net Sales outside the United States exceed [*]
in any calendar year, then commencing at the beginning of the first calendar
quarter after the achievement of (i) or (ii), the royalty rate in Section 6.1(a)
shall be adjusted to [*] of Net Sales.

               (c) Adjustments for Patent and Competitive Matters. The royalties
in this Section 6.1 shall be subject to a reduction of fifty percent (50%) with
respect to Net Sales in countries during which time there is both (i) no Valid
Claim under the Licensed  Patents, and (ii) a competitive product containing
Hyaluronidase as an active ingredient is being marketed and distributed in such
country by an entity other than Allergan, its Affiliates or its sublicensees and
is being used within the Field.

        6.2 Profit Split in United States. The parties shall share equally the
Net Profits in the United States by periodic payment of Profit Payments to Ista
by Allergan. "Net Profits" shall be defined as Net Sales less Manufacturing
Expenses less Marketing and Distribution Expenses for the Product in the United
States. The Profit Payment shall be one-half ( 1/2) of such Net Profits. For
purposes of such calculation Net Profits will be calculated consistent with the
following definitions.

               (a) Net Sales shall have the meaning set forth in Section 1.19
above.

               (b) Manufacturing Expenses shall mean, (i) if the Product is
being purchased by Allergan from Ista pursuant to the Supply Agreement, the
purchase price as set forth therein, as periodically adjusted therein, or (ii)
if the Product is being purchased from a Third Party or manufactured by
Allergan, the then applicable purchase price set forth in the Supply Agreement,
as periodically adjusted therein.

               (c) Marketing and Distribution Expenses shall include the costs
defined below. To the extent that such costs are not discretely identifiable,
Allergan and Ista will aggregate such costs in accordance with its standard
procedures, which will be allocated to the Product consistent with each party's
standard cost allocation procedures.

*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

                                       10
<PAGE>   13

                    (i) Product specific marketing expense incurred for
physician training, direct advertising, films, samples, exhibits, clinical
conference aids, peer promotion activities, marketing research and other direct
out-of-pocket costs normally included as marketing expenses by Allergan's
accounting procedures.

                    (ii) Direct costs, including salaries and employment
benefits for Allergan's Product manager(s) and field sales force properly
allocated to the sale of the Product.

                    (iii) Direct costs, including salaries and employment
benefits for Ista medical marketing liaison personnel properly allocated to the
sale of the Product.

                    (iv) A reasonable allocation of overhead costs computed as a
mutually agreed percentage of such costs and directly related to the
commercialization of the Product.

                    (v) Direct out-of-pocket costs for distribution, transport
and storage of the Product.

                    (vi) Costs incurred for any post-market surveillance studies
approved by the Joint Operating Committee for the Product;

                    (vii) Damages and costs arising out of an infringement suit
as described in more detail in Section 10.4; and

                    (viii) Any other costs or expenses incurred which are
incidental to the marketing or distribution of the Product which are designated
as marketing and distribution expenses by the Joint Operating Committee.

        6.3 To the extent Manufacturing Expenses and Marketing and Distribution
Expenses exceed Net Sales in any quarter (resulting in negative "Net Profits"),
such excess shall be carried forward and used in the calculation of Net Profits
for the subsequent quarter or quarters, until such excess has been fully used.

        6.4 Reports, Exchange Rates. During the term of this Agreement and while
Royalties or Profit Payments are payable hereunder, Allergan shall furnish to
Ista a written quarterly report showing, on a country by country basis: (i) the
Net Sales during such quarter and the calculation thereof; (ii) the Royalties
and Profit Payments payable in United States dollars which shall have accrued in
respect of such Net Sales and the calculation thereof; (iii) withholding taxes,
if any, required by law to be deducted in respect of such sales, as applicable;
and (iv) the exchange rates used in determining the amount of United States
dollars. All amounts payable shall first be calculated in the currency of sale
and then converted on a monthly basis into United States dollars using the rate
of exchange used by Allergan in preparing its quarterly financial reports.
Reports, together with the Royalties and Profit Payments payable for the periods
to which the reports relate shall be due on the sixtieth (60th) day following
the close of each calendar quarter. Allergan shall keep, in accordance with
generally accepted accounting principles consistently applied, complete and
accurate records concerning sales of the Product in the Territory in sufficient
detail to enable the Royalties or Profit Payments payable hereunder to be
determined.

        During the term of this Agreement and while Profit Payments are payable
hereunder, Ista shall furnish to Allergan a written quarterly report showing
Ista's Marketing and Distribution Expenses for such period.

                                       11
<PAGE>   14

        6.5 Audits.

               (a) Upon the written request of Ista, but not more than once each
calendar year, Allergan shall permit an independent public accountant selected
by Ista and acceptable to Allergan, which acceptance shall not be unreasonably
withheld or delayed, to have access during normal business hours to such of the
records of Allergan as may be reasonably necessary to verify the accuracy of the
royalty and profit reports hereunder in respect of any quarter or quarters year
ending not more than thirty-six (36) months prior to the date of such request.
In the event such accountant concludes that additional Royalties and Profit
Payments were owed during such period, the additional Royalties and Profit
Payments shall be paid within thirty (30) days of the date Ista delivers to
Allergan such accountant's written report so concluding. The fees charged by
such accountant shall be paid by Ista unless the audit discloses that the
Royalties and Profit Payments reported payable by Allergan for the audited
period have been understated by more than ten percent (10%) of the Royalties and
Profit Payments actually payable for such period, in which case Allergan shall
pay the reasonable fees and expenses charged by the accountant. Ista agrees that
all information subject to review under this Section 6.4 is confidential and
that it shall cause its accountant to retain all such information in confidence.

               (b) Upon the written request of Allergan, but not more than once
each calendar year, Ista shall permit an independent public accountant selected
by Allergan and acceptable to Ista, which acceptance shall not be unreasonably
withheld or delayed, to have access during normal business hours to such of the
records of Ista as may be reasonably necessary to verify the accuracy of the
Profit Payment calculations hereunder in respect of any quarter or quarters
ending not more than thirty-six (36) months prior to the date of such request.
In the event such accountant concludes that lower Profit Payments were owed by
Allergan during such period, the difference between the Profit Payments owed by
Allergan and the Profit Payments actually paid by Allergan shall be reimbursed
by Ista within thirty (30) days of the date Allergan delivers to Ista such
accountant's written report so concluding. The fees charged by such accountant
shall be paid by Allergan unless the audit discloses that the various expenses
reported by Ista for purpose of calculating the Profit Payment for the audited
period are overstated by more than ten percent (10%) of the actual expenses for
such period, in which case Ista shall pay the reasonable fees and expenses
charged by the accountant. Allergan agrees that all information subject to
review under this Section 6.4 is confidential and that it shall cause its
accountant to retain all such information in confidence.

        6.6 Payment Terms. Royalties and Profit Payments shown to have accrued
by each periodic report provided for under this Agreement shall be due and
payable on the date such periodic report is due. Payment of Royalties and Profit
Payments in whole or in part may be made in advance of such due date. Royalties
and Profit Payments determined to be owing, and any overpayments to be credited,
with respect to any prior quarter shall be added, or credited, as the case may
be, to the next quarterly payment hereunder.

        6.7 Withholding of Taxes. Any withholding of taxes levied by tax
authorities on the payments hereunder shall be borne by Ista and deducted by
Allergan from the sums otherwise payable by it hereunder for payment to the
proper tax authorities on behalf of Ista. Allergan agrees to cooperate with Ista
in the event Ista claims exemption from such withholding or seeks deductions
under any double taxation or other similar treaty or agreement from time to time
in force, such cooperation to consist of providing receipts of payment of such
withheld tax or other documents reasonably available to Allergan.

                                       12
<PAGE>   15

        6.8 Exchange Controls. Except as hereinafter provided in this Section,
all payments to be made pursuant to this Section 6.7 shall be paid in United
States dollars. If at any time legal restrictions prevent the prompt remittance
of part or all of the Royalties and Profit Payments due hereunder with respect
to any country, payment shall be made through such lawful means or methods as
Allergan may determine. When in any country the law or regulations prohibit both
the transmittal and deposit of royalties on sales in such a country, Royalties
and Profit Payments shall be suspended for as long as such prohibition is in
effect, and as soon as such prohibition ceases to be in effect, all Royalties
and Profit Payments that Allergan or its sublicensees would have been obligated
to transmit or deposit, but for the prohibition, shall forthwith be deposited or
transmitted promptly to the extent allowable, as the case may be, along with
interest accrued thereon to the date of payment.

7. MILESTONES.

        7.1 Milestones Earned. As additional consideration for the license
granted to Allergan hereunder, Allergan shall pay to Ista the following amounts
upon achievement (prior to the expiration of termination of this Agreement) of
each of the applicable milestones:

<TABLE>
<CAPTION>
MILESTONE                                                           PAYMENT/FORGIVENESS
<S>                                                         <C>
(a) Approval for marketing for treatment of vitreous                    [*]
    hemorrhage under a European Community central
    filing**
(b) Approval of NDA for treatment of vitreous                           [*]
    hemorrhage in United States**
(c) Approval in United States of labeling for                           [*]
    retreatment of vitreous hemorrhage in previously
    treated eye
(d) Proof of Concept for Proliferative Diabetic                         [*]
    Retinopathy                                             [*] plus forgiveness of up
                                                                  to [*] of Loan
                                                                  Indebtedness)***
</TABLE>

* payable only if Milestone (b) is paid.
** not payable if approved solely as [*]
*** if Ista's Loan Indebtedness at the time of Milestone accomplishment is less
than the maximum amount to be forgiven by Allergan at such time, then the
payment to Ista will be increased so that the consideration received by Ista for
such Milestone accomplishment equals the total amount shown for that Milestone

        7.2 Single Payment. Each of the foregoing milestone payments shall be
payable one time only, even if such milestones are subsequently met again for
another Product. All payments to be made by Allergan to Ista pursuant to this
Section 7.2 shall be made in United States dollars. Ista shall promptly notify
Allergan in writing of the occurrence of the milestones set forth above. Within
twenty (20) business days after the date of such notice, Allergan shall pay to
Ista by certified or bank check, wire transfer or other means acceptable to
Ista, the milestone payments set forth above.

8. REGULATORY MATTERS.

        8.1 Right of Reference, Regulatory Dossiers in the United States and
Europe. In the United States and Europe, Ista shall prepare, file, maintain and
own Regulatory Dossiers for the Product. Ista hereby grants Allergan a
royalty-free right (and shall so advise applicable regulatory authorities if
required) to reference Ista's or its Controlled Affiliates' and Ista's
Hyaluronidase suppliers' and Approved Third Party Contractors' (as defined in
the Supply Agreement) Regulatory

*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

                                       13
<PAGE>   16

Dossiers and registrations for Hyaluronidase and the Product for the purpose of
enabling Allergan to exercise its rights hereunder with respect to the Products
in the Territory, including certain rights beyond the terms of the Agreement
pursuant to Section 12.5. At the request of Allergan, Ista shall assign all
necessary Regulatory Dossiers relating to the Product outside of the United
States to Allergan and Ista further agrees to execute and deliver such
instruments and take such other actions as Allergan shall reasonably request in
order to carry out this provision, including but not limited to, assignments of
regulatory approvals. For purposes of this Section 8, Europe shall mean those
countries which are participants in the EMEA.

        8.2 Regulatory Dossiers outside the United States and Europe. Outside
the United States and Europe, Ista shall give Allergan the right to prepare,
file, and maintain Regulatory Dossiers for the Product in Allergan's name, and
Allergan shall do so in such countries in which it markets the Product pursuant
to Section 9. Ista shall also give Allergan ownership rights to such Regulatory
Dossiers, subject to the terms and conditions of this Agreement and the
following: (i) Allergan shall, at Ista's request and option, provide Ista with
complete copies of any Regulatory Dossiers filed by or under authority of
Allergan; (ii) subject to Section 4.3, Allergan shall promptly provide Ista or
its designees with the relevant portions of (and make available for copying by
Ista or its designees), and the right to cross-reference, any Regulatory
Dossiers held in the name of Allergan (or that of its Affiliate or sublicensee)
reasonably necessary or useful to enable Ista or its designees to market
products other than Product in the applicable country, and Allergan shall
execute, acknowledge and deliver such further instruments, and shall do all such
other acts, all as promptly as possible, which may be necessary or appropriate
to effectuate such right in each such country and to otherwise make fully
available to Ista and its designees the benefits of such Regulatory Dossiers for
purposes of exercising any right not exclusively granted to Allergan hereunder,
upon the request of Ista.

        8.3 Product Recalls. In the event (a) any government authority issues a
request, directive or order that the Product be recalled, or (b) a court of
competent jurisdiction orders such a recall, or (c) Allergan and Ista, after
consultation with each other, determine that the Product should be recalled, or
(d) either Allergan or Ista, after consultation with each other, if legally
required to make such recall, does so, the parties shall take all appropriate
corrective actions, and shall cooperate in the investigations surrounding the
recall. Allergan shall handle notification of customers and return of Product
from customers. The owner of the relevant regulatory approval shall handle all
communications and requests with regulatory agencies regarding any recalls. If
such recall results from any cause or event arising from a sole responsibility
of Ista as set forth in this Agreement or in the Supply Agreement or is solely
attributable to Ista, Ista shall be responsible for all expenses of the recall
and Allergan may deduct any such expenses borne by Allergan from any payment due
to Ista under this Agreement. If such recall results from a sole responsibility
of Allergan as set forth in this Agreement or in the Supply Agreement or is
solely attributable to Allergan, Allergan shall be responsible for the expenses
of recall and shall reimburse Ista for expenses incurred by Ista for such
recall. In the event that the recall results from any cause(s) or event(s)
arising from a joint responsibility of the parties or partially from a
responsibility of Ista and partially from a responsibility of Allergan, Ista and
Allergan shall be jointly responsible for expenses of the recall in proportion
to each such party's proximate fault with respect to the recall. If the parties
are unable to agree on the allocation of such fault, then such dispute shall be
subject to the dispute resolution provisions of Section 15. For the purpose of
this Agreement, the expenses of recall shall include, without limitation, the
expenses of notification and destruction or return of the recalled Product, cost
for the Product recalled, legal expenses, inventory write-offs and penalties
resulting from Third Party contracts, but shall not include goodwill, lost
profits or other similar intangible or speculative claims.

                                       14
<PAGE>   17

        8.4 Adverse Event Reports. Each of Ista and Allergan shall report to the
other potentially serious or unexpected adverse events (including adverse drug
experiences, as defined in 21 C.F.R. Section 314.80 or other applicable
regulations ) with respect to the Product of which it becomes aware promptly and
in no event later than five (5) days after initial receipt of the information by
such party. Each such report shall identify lot numbers and customers affected,
if known. Each of Ista and Allergan shall report to the other party summaries of
other adverse events with respect to the Product every twelve (12) months.

9. MARKETING.

        9.1 Marketing Plans. Allergan shall prepare marketing plans for the
United States (the "Marketing Plans"). Such Marketing Plans shall include plans
related to the prelaunch, launch, promotion and sale of the Product. Allergan
shall submit the Marketing Plans at annually to the Joint Operating Committee.
In addition, at least annually Allergan provide marketing strategies and
information on Major Markets other than the United States.

        9.2 Diligence. Allergan shall use reasonable commercial efforts,
consistent with local market, business, regulatory and competitive conditions to
seek Marketing Approval and launch the Product in each country of the Territory
and thereafter to market, promote and distribute such Product in such country.

        9.3 Failure to Commercialize. In the event that Allergan has not made a
First Commercial Sale in a Major Market within twelve (12) months after
Marketing Approval in such Major Market, unless the parties mutually agree not
to market Product in such Major Market, then the license granted in Section 4.1
shall become non-exclusive in such country unless Allergan's failure to make
such a First Commercial Sale results from Ista's failure to supply Product.

        9.4 Product Marking. Product intended for distribution in the U.S. shall
be marked as a product of Allergan, but shall also carry the legend: "Marketed
under license from Ista Pharmaceuticals, Inc." with equal prominence to any
reference to Allergan. Product intended for distribution in the Territory
outside the U.S. shall carry the same legend, but not necessarily with equal
prominence. Ista reserves the right, upon reasonable notice, to specify a
different legend for the Product.

10. PATENTS, IMPROVEMENTS.

        10.1 Prosecution and Maintenance. Ista shall be responsible for and
shall diligently carry out and shall bear all costs (including attorney fees)
for the preparation, filing, prosecution, maintenance, and extensions, if any,
of all patents or patent applications within the Licensed Patents in those
countries in the Territory listed on Appendix 1.15. In addition, Ista shall
promptly advise Allergan of all material correspondence, filings and notices of
action between Ista and the United States Patent and Trademark Office ("PTO")
and equivalent foreign patent offices concerning the Licensed Patents. If Ista
elects not to prepare and file a patent application or discontinues the
prosecution of any patent application or maintenance of any patent within the
Licensed Patents, then Ista shall promptly notify Allergan and supply Allergan
with copies of all written communications with such office. In the event that
Allergan reasonably determines that the failure of Ista to pursue the filing and
prosecution of the patent application would adversely affect the rights of
Allergan under this Agreement, Allergan may, but does not have the obligation
to, file or continue prosecution of such application or maintain such patent at
its own expense. If Allergan so elects, then Ista shall be responsible for the
reasonable costs incurred by Allergan in connection with such filing or

                                       15
<PAGE>   18

prosecution in any country listed in Appendix 1.15, and Allergan may deduct any
such costs borne by Allergan from any payment due to Ista under this Agreement.

        10.2 Improvements. Ista shall promptly notify Allergan of any
Improvements and of any efforts by Ista to patent Improvements in the Territory
including, but not limited to designation of the countries in which any patent
application in respect thereof is to be filed. Any patent application in respect
of such Improvement and any patent issued therefrom shall become part of the
Licensed Patents and Appendix 1.15 shall be modified to reflect the addition to
Licensed Patents. If any Improvement is not patented, it shall become part of
the Licensed Know-How.

        10.3 Enforcement of Patent Rights. If either Allergan or Ista has
knowledge of any infringement or likely infringement of a Licensed Patent or
unauthorized use of Licensed Know-How, then the party having such knowledge
shall promptly inform the other party in writing, and the parties shall promptly
consult with one another regarding the action to be taken. Unless the parties
otherwise mutually agree, Ista shall prosecute such suit, and Allergan shall
cooperate with Ista in the prosecution thereof and Ista shall have the right to
determine the strategy of the prosecution of such suit. Notwithstanding the
foregoing, if Allergan is participating in the prosecution, Allergan shall be
entitled to have input in the strategy of prosecution. Ista shall have the right
to determine the counsel to be retained by the parties in connection with such
action or claim, which counsel shall be reasonably satisfactory to Allergan.
Ista may seek the assistance and participation of Allergan in the action or
claim. If Ista prosecutes such claim without the participation of Allergan, the
costs and expenses incurred in connection with such action or claim shall be
borne by Ista. However, if Allergan participates in the action or claim, the
costs and expenses incurred in connection with such action or claim shall be
shared equally by Ista and Allergan. If Allergan does not participate in the
prosecution of the action or claim, or unless otherwise provided in this Section
10.3, any offer of settlement and any settlement shall be in Ista's discretion,
provided that any offer of settlement or settlement does not conflict with
licenses granted under Section 4. If Allergan participates in the prosecution of
the action or claim, then any offer of settlement and any settlement shall be
subject to the prior approval of both Allergan and Ista. Each party agrees not
to unreasonably withhold its approval of any such settlement. If Allergan does
not participate in the prosecution of the action or claim, any recovery of
damages or other payments received in connection with such action or claim shall
be realized by Ista. If Allergan participates in the prosecution any recovery of
damages or other payments received in connection with such shall be allocated
between and disbursed to Allergan and Ista as follows: (i) first, to reimburse
Allergan and Ista for their respective costs and expenses incurred in connection
with such action, and (ii) the balance of recovery or other payments to be
divided fifty percent (50%) to Allergan and fifty percent (50%) to Ista. In the
event that the recovery of damages is not sufficient to cover costs and expenses
incurred by the parties in connection with such action, each party shall be
reimbursed on a pro rata basis according to each party's percentage of the total
costs and expenses incurred by the parties together.

        10.4 Infringement of Third Party Patent Rights. If a claim or suit is
brought against Allergan alleging (a) infringement of any patent or unauthorized
use of any Licensed Know-How owned by a Third Party by reason of Allergan's
exercise of its licenses hereunder or (b) an interest in any patent under the
Licensed Patents, Allergan shall promptly give written notice to Ista and Ista
shall be responsible for the defense of such claim and bear the cost thereof.
The parties shall furnish each other with reasonable assistance regarding such
claim or suit as may be requested by the other party. Any offer of settlement or
settlement of the claim or suit by one party shall have the prior written
approval of the other party, such approval not to be unreasonably withheld. If
any amounts are paid or payable to a Third Party by Allergan or any damages
and/or costs are awarded against

                                       16
<PAGE>   19

Allergan in such suit, then in the calendar year of payment, such amounts,
damages and costs may be offset against any Royalties due Ista under Section 6
of this Agreement, or Ista may make such payment on behalf of Allergan. For
damages and costs accruing from sales of Product in the United States, Allergan
shall apply such damages and costs as a Marketing and Distribution Expense under
Section 6.2(c) so that the amounts payable are included in the calculation of
Net Profits. Any amounts which Allergan is entitled to credit against Royalties
under this Section 10.4 shall be carried forward until all such amounts have
been credited.

11. REPRESENTATIONS AND WARRANTIES.

        11.1 Ista Representations and Warranties. Ista hereby represents and
warrants that:

               (a) Authority. Ista has the full right, power and corporate
authority to enter into this Agreement, and to make the promises and grant the
licenses set forth in this Agreement and that there are no outstanding
agreements, assignments or encumbrances in existence inconsistent with the
provisions of this Agreement.

               (b) Ownership, Title. Ista is the sole and exclusive owner or
exclusive licensee of the entire right, title and interest in and to each of the
Licensed Patents, and Ista Trademarks and all of the Licensed Know-How and has
the right to grant rights therein to Allergan in the Territory. All employees,
consultants, advisors or contractors who have developed or assisted, in the
development, or will develop or assist in the development, of the Licensed
Technology, have executed valid assignments of their rights to Ista.

               (c) Litigation. To best of Ista's knowledge as of the Effective
Date, there are no litigation actions, claims or suits by a Third Party
threatened or pending before any court or governmental agency or other tribunal
relating to the Licensed Patents, Ista Trademarks or Licensed Know-How.

               (d) No Third Party Rights. Ista has not authorized (other than as
disclosed in writing to Allergan by way of a disclosure letter on the Effective
Date), and shall not during the term of this Agreement authorize Third Parties
to practice the Licensed Patents or the Licensed Know-How in the Field in the
Territory or otherwise grant rights or licenses to market and sell the Product
in the Field in the Territory, or use the Ista Trademark(s) in the Territory
inconsistent with the rights granted to Allergan herein

               (e) Validity and Infringement. As of the Effective Date, Ista is
not aware of any prior act or any fact which would cause it to conclude that any
Licensed Patent is invalid or unenforceable, PROVIDED HOWEVER, THAT ISTA
EXPRESSLY DOES NOT WARRANT THAT ANY ISTA PATENT IS VALID OR ENFORCEABLE.

               (f) Product Formulation. To the best of Ista's knowledge as of
the Effective Date (other than as disclosed in writing to Allergan by way of a
disclosure letter on the Effective Date), there are no defects in design or
formulation of the Product which would adversely and unduly affect its
performance or create an unusual and undue risk of injury to person or property
beyond those as may be expected from a pharmaceutical product which has not
received marketing approval in the United States.

               (g) Regulatory Matters. To the best of Ista's knowledge as of the
Effective Date, all of the Regulatory Dossiers are free of any
misrepresentations or omissions on the part of Ista, its Affiliates,
predecessors-in-interest or agents, all steps taken by Ista, its

                                       17
<PAGE>   20

Affiliates, predecessors-in-interest or agents in the collection, assembly and
presentation of the data in such Regulatory Dossiers were legitimate and
reasonable when viewed within the standards of the industry, and that all
responses of Ista, its Affiliates, predecessors-in-interest or agents to any
inquiries of the FDA were made in good faith.

        11.2 Allergan Representations and Warranties. Allergan hereby represents
and warrants that (i) it has the full right, power and corporate authority to
enter into this Agreement and to make the promises set forth in this Agreement
and that there are no outstanding agreements, assignments or encumbrances in
existence inconsistent with the provisions of this Agreement, and (ii) the
execution, delivery and performance of this Agreement does not conflict with any
agreement, instrument or understanding, oral or written, to which Allergan is a
party or by which it is bound, nor to Allergan's knowledge, violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.

        11.3 Limitation. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT AND THE SUPPLY AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR
EXTENDS ANY WARRANTIES OF ANY KIND EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, OR VALIDITY OF ANY PATENTS ISSUED OR PENDING.

12. TERM AND TERMINATION

        12.1 Expiration of This Agreement. Unless terminated earlier pursuant to
this Section 12, this Agreement shall expire and the licenses granted by Ista to
Allergan shall become fully paid and exclusive, (a) within the Territory, but
except as to the United States, on a country-by-country basis upon the later of
(i) ten (10) full calendar years commencing on the January 1 after the First
Commercial Sale of the Products in such country or (ii) the last to expire of
any Valid Patent Claim in such country and (b) in the United States after ten
(10) full calendar years commencing on the January 1 after the First Commercial
Sale of the Products in the United States (provided all outstanding amounts
borrowed under the Credit Agreement have been repaid).

        12.2 Termination of This Agreement for Breach. This Agreement may be
terminated by one party upon written notice by reason of a material breach by
the other party that the breaching party fails to remedy within ninety (90) days
after written notice thereof by the non-breaching party, or in the case that
such breach cannot be cured within such period, the breaching party continues to
use diligent efforts to cure such breach until actually cured.

        12.3 Termination in Event of Bankruptcy.

               (a) Either party may terminate this Agreement upon bankruptcy,
insolvency, dissolution or winding up of the other.

               (b) All licenses granted under this Agreement are deemed to be,
for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to
"intellectual property" as defined in Section 101 of such Code. The parties
agree that Allergan may fully exercise all of its rights and elections under the
Bankruptcy Code. The parties further agree that, in the event Allergan elects to
retain its rights as a licensee under such Code, Allergan shall be entitled to
complete access to the Licensed Technology licensed to it hereunder and all
embodiments of such Licensed Technology,

                                       18
<PAGE>   21

but only as necessary for the purposes of exploitation of the licenses granted
under this Agreement. Such embodiments of the Licensed Technology shall be
delivered to Allergan not later than: (i) the commencement of bankruptcy
proceedings against Ista, upon written request, unless Allergan elects to
perform its obligations under the Agreement, or (ii) if not delivered under (a)
above, upon the rejection of this Agreement by or on behalf of the Allergan,
upon written request.

        12.4 Termination By Allergan. Allergan, in its discretion, may terminate
this Agreement at any time, on a country by country basis, or in its entirety,
upon delivery by Allergan to Ista of ninety (90) days prior notice thereof.

        12.5 Effect of Expiration or Termination of This Agreement Generally.

               (a) Existing Obligations. Expiration of this Agreement for any
reason shall not relieve the Parties of any obligation that accrued prior to
such expiration or termination.

               (b) Survival. The provisions of Sections 1, 6 (with respect only
to Royalties and Profit Payments accrued at the time of expiration or
termination but not yet reported or paid), 8.1 (to the extent applicable), 11,
12, 13, 14 and 15 shall survive the expiration or termination of this Agreement.

               (c) Termination of Licenses. Except as provided in Section
12.5(e) below, upon expiration or termination of this Agreement all licenses and
rights granted to Allergan hereunder shall terminate and, except as provided in
Section 12.5(d) below, Allergan will immediately cease to sell Products;

               (d) Disposition of Inventory of Products. (a) Allergan may
dispose of its inventory of Products on hand as of the effective date of
termination, and may fill any orders for Products accepted prior to the
effective date of termination, for a period of six (6) months after the
effective date of termination and (b) within thirty (30) days after disposition
of such inventory and fulfillment of such orders Allergan will forward to Ista a
final report containing the details required by Section 6 hereof and pay Ista
all Royalties and Profit Payments due in such period;

               (e) Residual Rights. Upon expiration of this Agreement in any
country (other than the United States) pursuant to clause (a) of Section 12.1
above, Allergan shall have a fully-paid, perpetual, irrevocable license, with
right to sublicense, under the Licensed Technology to manufacture, use, market,
distribute, offer to sell, and sell the Product in the Field in such country.
Nothing herein shall obligate Ista to deliver, at such time, any manufacturing
know-how to allow Allergan to exercise its residual rights under this Section
12.5(e).

               (f) Reassignment of Regulatory Dossiers. Upon termination of this
Agreement by Allergan pursuant to Section 12.4 or by Ista pursuant to Section
12.2, in any country in which Ista has assigned the Regulatory Dossier for the
Product to Allergan pursuant to Section 8.1 herein, Allergan shall promptly
assign such Regulatory Dossier back to Ista. In addition, in such event Allergan
shall ensure that all regulatory filings and approvals in other than Ista's name
pursuant to Section 8.2 relating to the Product (to the extent legally
permissible in the relevant country) are promptly assigned to Ista after such
termination of this Agreement. With respect to any Regulatory Dossier held in
the name of a sublicensee of Allergan, Allergan shall cause such sublicensee to
provide Ista with a letter of authorization for the foregoing, in form and
substance reasonably acceptable to Ista, simultaneously with the granting of
rights by Allergan to such sublicensee.

                                       19
<PAGE>   22

Allergan further agrees to execute and deliver such instruments and take such
other actions as Ista shall reasonably request in order to carry out this
provision

        12.6 Allergan's Right to Offset Royalties and Other Payments. In the
event of (i) the bankruptcy of Ista or (ii) a breach by Ista of any of its
representations, warranties or obligations hereunder (including a material
breach by Ista which would entitle Allergan to terminate this Agreement pursuant
to Section 12.2), Allergan shall have the right and option, in addition to all
other remedies at law or under this Agreement, to offset the amount of such
damages and/or costs against any amounts otherwise due to Ista under Section 6
or Section 7.

13. INDEMNIFICATION, INSURANCE

        13.1 By Ista. Ista shall indemnify, defend and hold Allergan, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs (including reasonable attorney fees
and expenses), losses or liabilities of any kind which are asserted by a Third
Party and which (a) involve the registration (in countries for which Ista is
responsible) or use of the Product as a pharmaceutical product or the safety or
efficacy of the Product, including any theory of strict liability in tort or any
other theory of product liability, and which are not otherwise attributable to
any negligent act or omission or willful misconduct on the part of Allergan, its
Affiliates, sublicensees, directors, employees, agents or representatives; or
(b) arise from claims that the Product or its manufacture, use or sale infringes
a patent, trademark or other proprietary right of a Third Party; or (c) arise
from a breach of a representation or warranty in Section 11.1; or (d) arise out
the negligent act or omission or willful misconduct by Ista in the manufacture
of the Product by Ista.

        13.2 By Allergan. Allergan shall indemnify, defend and hold Ista, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs (including reasonable attorney fees
and expenses), losses or liabilities of any kind which; (a) arise from a breach
of a representation or warranty in Section 11.2; or (b) arise from the improper
registration (in countries for which Allergan is responsible), marketing,
handling or distribution of the Product; or (c) arise from claims that the
Product infringes the trademark of a Third Party if the Product is marketed
using a trademark belonging to Allergan pursuant to Section 5.4.

        13.3 Condition of Indemnification. If either party expects to seek
indemnification under this Article, it shall promptly give notice to the
indemnifying party of the basis for such claim of indemnification. If
indemnification is sought as a result of any Third Party claim or suit, such
notice to the indemnifying party shall be within fifteen (15) days after receipt
by the other party of such claim or suit; provided, however, that the failure to
give notice within such time period shall not relieve the indemnifying party of
its obligation to indemnify unless it shall be materially prejudiced by the
failure. Each such party shall cooperate fully with the other party in the
defense of all such claims or suits. No offer of settlement, settlement or
compromise shall be binding on a party hereto without its prior written consent
(which consent shall not be unreasonably withheld) unless such settlement fully
releases the other party without any liability, loss, cost or obligation to such
party.

        13.4 Insurance. Ista shall maintain comprehensive general liability
(CGL) insurance, including broad form contractual liability and product
liability coverages, in an amount of at least five million dollars ($5,000,000)
for bodily injury and property damage. Allergan shall be named as an additional
insured under Ista's CGL policy. Ista shall maintain such insurance during the
term of this Agreement and thereafter for a period of five (5) years. Allergan
shall obtain by the date of the

                                       20
<PAGE>   23

first marketing approval for the Product, at its costs, a comprehensive general
liability insurance policy, including broad form contractual liability and
product liability coverages and shall maintain such insurance for the term of
this Agreement and thereafter for a period of five (5) years. Ista shall be
named as an additional insured under Allergan's CGL policy. Each party upon
request shall provide the other party with a certificate of insurance as
evidence of the requested coverages and shall give the other party at least
thirty (30) days notice of any cancellation, termination or change in such
insurance.

14. CONFIDENTIAL INFORMATION AND PUBLICITY.

        14.1 Due Care. It is recognized by the parties that during the term of
this Agreement, the parties shall exchange Confidential Information pertaining
to their performance hereunder. Each party shall exercise due care to prevent
the disclosure of Confidential Information of the other party.

        14.2 Permitted Disclosures.

               (a) Notwithstanding the above, nothing contained in this
Agreement shall preclude Ista or Allergan from utilizing or disclosing to others
its Confidential Information or utilizing Confidential Information received from
the other party as may required: (i) for regulatory purposes, including
obtaining FDA approvals; (ii) for audit, tax or customs purposes; or (iii) by
law (including disclosure obligations under applicable securities laws), court
or other government order, provided that the party subject to such order
notifies the other party and uses reasonable efforts to obtain a protective
order covering such Confidential Information.

               (b) In addition to the foregoing, Allergan and Ista may disclose
the Confidential Information of the other party, only to such employees or Third
Parties who have a reasonable need for the Confidential Information in the
performance of their services in connection with the matters set forth in this
Agreement or otherwise within the scope of the licenses set forth in Article 5
and Section 3.9; who are informed of the confidential nature of the Confidential
Information; and who are bound not to disclose such Confidential Information.

        14.3 Other Agreements. The parties have entered into a Confidential
Disclosure Agreement dated February 8, 1999 ("CDA"). The CDA shall remain in
full force and effect as to its confidentiality requirements for the terms
specified therein. However, on and after the Effective Date of this Agreement,
all subject matter conveyed or covered under this Agreement shall be governed in
all respects by the confidentiality provisions contained in this Article 14. The
obligations of the parties set forth in this Article 14 shall apply during the
term hereof and for a period of five (5) years after the date of early
termination or expiration of this Agreement or any extension thereof.

        14.4 Publicity. The parties agree that upon the execution of this
Agreement, a press release approved by both parties shall be issued. Except for
such press release and periodic disclosures by Ista or Allergan required by law
or regulation or in the ordinary course of its SEC filings, neither party shall
(a) originate any publicity, news release or other public announcement, written
or oral, whether to the public press, stockholders or otherwise, relating to
this Agreement, any amendment hereto or performance hereunder, or (b) use the
name of the other in any publicity, news release or other public announcement,
except (i) with the prior written consent of the other party, or (ii) as
required by law, in which case the originating party shall give to the other
party at least ten (10) days prior notice of such proposed disclosure to
complete a review in order to offer comments and modifications. Consistent with
applicable law, the other party shall have the right to

                                       21
<PAGE>   24

request reasonable changes to the disclosure to protect its interests. In all
other cases, the originating party shall give the consenting party at least ten
(10) days to complete a review in order to offer comments, modifications or to
give such consent. The party required to give consent shall endeavor to respond
in less than ten (10) days if practicable.

15. MISCELLANEOUS.

        15.1 Force Majeure. Neither party shall be held liable or responsible to
the other party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party, including but not limited to fire, floods,
embargoes, war, acts of war (whether war is declared or not), insurrections,
riots, civil commotions, strikes, lockouts or other labor disturbances, acts of
God or acts, omissions or delays in acting by any governmental authority or the
other party; provided, however, that the party so affected shall use reasonable
commercial efforts to avoid or remove such causes of nonperformance, and shall
continue to perform hereunder with reasonable dispatch whenever such causes are
removed. Either party shall provide the other party with prompt written notice
of any delay or failure to perform that occurs by reason of force majeure. The
parties shall mutually seek a resolution of the delay or the failure to perform
as noted above.

        15.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed; provided,
however, that each of the parties may, without such consent, assign this
Agreement and its rights and obligations hereunder to its Affiliates or in
connection with the transfer or sale of all or substantially all of its
business, or in the event of its merger or consolidation or change in control or
similar transaction (which shall be deemed an assignment). Notwithstanding the
foregoing, Allergan can sell, transfer or assign its rights under the Agreement
to any Third Party as part of a sale of substantially all of its assets related
to its ophthalmic pharmaceutical business. Any purported assignment in violation
of the preceding sentences shall be void. Any permitted assignee shall assume
all obligations of its assignor under this Agreement in writing.

        15.3 Severability. Each party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the parties would not have entered into this Agreement
without the invalid provisions.

        15.4 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or international courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon the earlier of
receipt by the addressee or the second business day after dispatch by recognized
international courier.

                                       22
<PAGE>   25

        If to Ista:          Ista Pharmaceuticals, Inc.
                             15279 Alton Parkway, Suite 100
                             Irvine, California  92618
                             Attention:  Chief Financial Officer
                             Fax:  (949) 789-7740
                             Tel:  (949) 788-6000

        with a copy to:      Wilson Sonsini Goodrich & Rosati, P.C
                             650 Page Mill Road
                             Palo Alto, California  94304-1050
                             Attention:  David Boyko, Esq.
                             Fax:  (650) 493-6811
                             Tel:  (650) 493-9300

        If to Allergan:      Allergan, Inc.
                             2525 Dupont Drive
                             Irvine, California  92623
                             Attention:  Corporate Vice President of Science and
                             Technology
                             Fax:  (714) 246-6987
                             Tel:   (714) 246-4500

        with a copy to:      Allergan, Inc.
                             2525 Dupont Drive
                             Irvine, California  92623
                             Attention:  Allergan General Counsel
                             Fax:  (714) 246-4774
                             Tel:   (714) 246-4500

        15.5 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, United States, without
reference to its conflict of laws, rules and in connection with any dispute
hereunder, subject to Section 15.6 below, the parties consent to exclusive
jurisdiction and venue in the state and federal courts in Orange County,
California, United States.

        15.6 Dispute Resolution, Arbitration. Subject to Section 3.1, and except
with respect to matters pertaining to injunctive relief, in the event of any
dispute, the parties shall refer such dispute to the Chief Executive Officers of
Ista and Allergan (or their respective executive officer level designees) for
attempted resolution by good faith negotiations within thirty (30) days after
such referral is made. During such period of good faith negotiations, any
applicable time periods under this Agreement shall be tolled. In the event such
executives are unable to resolve such dispute within such thirty (30) day
period, the parties shall submit their dispute to binding arbitration before a
single arbitrator in Orange County, California, such arbitration to be conducted
pursuant to the American Arbitration Association rules for commercial disputes
then in effect. The arbitrator may permit limited discovery as he or she deems
appropriate in the circumstances of the dispute. The arbitrator shall have no
power to include an award of attorneys' fees and costs to the prevailing party,
or to award punitive, special, incidental or consequential damages.

        15.7 Entire Agreement. This Agreement, together with the Appendices and
Exhibits hereto, the letter dated March 21, 2000 from Ista to Allergan regarding
the Development Plan, the

                                       23
<PAGE>   26

Confidential Disclosure Agreement, Supply Agreement, Preferred Stock Purchase
Agreement and Credit Agreement contains the entire understanding of the parties
with respect to the subject matter hereof. In the event of any conflict or
inconsistency between any provision of any Exhibit hereto and any provision of
this Agreement, the provisions of this Agreement shall prevail. All express or
implied agreements and understandings, either oral or written, heretofore made
are expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by both parties hereto.

        15.8 Headings. The captions to the Sections hereof and Appendices or
Exhibits hereto are not a part of this Agreement, but are merely guides or
labels to assist in locating and reading the several Sections hereof.

        15.9 Independent Contractors. It is expressly agreed that Ista and
Allergan shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture or agency. Neither
Ista nor Allergan shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the other party to do so.

        15.10 Waiver. The waiver by either party hereto of any right hereunder
or the failure to perform or of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.

        15.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

        15.12 Limitation of Liability. NO PARTY SHALL BE LIABLE TO ANOTHER FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES, INCLUDING BUT
NOT LIMITED TO LOST PROFITS, ARISING FROM OR RELATING TO ANY BREACH OF THIS
AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. Nothing
in this Section 15.12 is intended to limit or restrict the indemnification
rights or obligations of any party.

                                       24
<PAGE>   27

        IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized representative as of the day and year
first above written.

ALLERGAN SALES, INC.                        ISTA PHARMACEUTICALS, INC.

By:   /s/ [ILLEGIBLE]                       By:   /s/ EDWARD H. DANSE
   -------------------------------             --------------------------------
Its:  Chief Executive Officer               Its:  Chief Executive Officer
    ------------------------------              -------------------------------
Date: March 29, 2000                        Date: March 29, 2000
    ------------------------------              -------------------------------

ALLERGAN SALES, LTD.

By:   /s/ [ILLEGIBLE]
   -------------------------------
Its:  Chief Executive Officer
    ------------------------------
Date: March 29, 2000
     -----------------------------

                                       25
<PAGE>   28

                                  APPENDIX 1.6

                        VITRASE SUMMARY DEVELOPMENT PLAN

Indication: Management of Vitreous Hemorrhage

<TABLE>
<CAPTION>
        Activity                                      Status/Plan
        --------                                      -----------
<S>                                                   <C>
        Preclinical studies                           Complete
        Phase I Study                                 Complete
        Phase II US Study                             Complete
        Phase II Mexico Study                         Complete
        Phase III NA Study                            Ongoing
        Phase III ExNA Study                          Ongoing
        NDA Submission                                [*]
        MAA Submission                                [*]
        Phase IV Validation Study (if required)       [*]
</TABLE>

Indication:  Moderate Vitreous Hemorrhage

<TABLE>
<CAPTION>
        Activity                                      Status/Plan
        --------                                      -----------
<S>                                                   <C>
        Preclinical Studies                           Complete
        Phase I Study                                 Complete
        Phase II Study                                Complete
        Phase II/III Study                            [*]
</TABLE>

Indication:  Retreatment of Previously Treated Eyes

<TABLE>
<CAPTION>
        Activity                                      Status/Plan
        --------                                      -----------
<S>                                                   <C>
        Preclinical Studies                           Complete
        Phase I/II Study                              [*]
        Phase II/III Study                            [*]
        NDA Supplement Filed                          [*]
</TABLE>

Indication:  Proof of Concept for Diabetic Retinopathy

<TABLE>
<CAPTION>
        Activity                                      Status/Plan
        --------                                      -----------
<S>                                                   <C>
        Preclinical Studies                           Complete
        Phase II (Mexico) study                       Ongoing
        Phase I/II Safety (US) Study                  [*]
        Phase II (US et al) Study                     [*]
        Manuscript Submitted for Publication          [*]
</TABLE>

*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

<PAGE>   29

                                  APPENDIX 1.13

                 ISSUED TRADEMARKS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
     REF NO.        COUNTRY    TRADEMARK NO.                    MARK                     ISSUE DATE
     -------        -------    -------------                    ----                     ----------
<S>              <C>           <C>                            <C>                      <C>
ADCOR-009AU        Australia       725350                     Vitrase                     04/14/98
ADCOR-009CA          Canada       833,236                     Vitrase                   Statement of
                                                                                       use due 1/9/01
ADCOR-009MX          Mexico        556095                     Vitrase                     08/26/97
ADCOR-009RC      People's Rep.    1218274                     Vitrase                     10/28/98
                    Of China
ADCOR-009SG        Singapore       377/97                     Vitrase                     11/07/96
ADCOR-009T            U.S.       2,261,326                    Vitrase                     7/13/99
ADCOR-009KS       South Korea      404106                     Vitrase                     06/11/98
</TABLE>

          PENDING TRADEMARK APPLICATIONS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
     REF NO.        COUNTRY      SERIAL NO.                     MARK                    FILING DATE
     -------        -------      ----------                     ----                    -----------
<S>                <C>           <C>                          <C>                       <C>
ADCOR-009AR        Argentina     2,064,644                    Vitrase                     01/10/97
ADCOR-009BR          Brazil      819784990                    Vitrase                     1/10/97
ADCOR-009EU         European     000449777                    Vitrase                     1/08/97
                   Community
</TABLE>

<PAGE>   30

         TRADEMARK APPLICATIONS OF ISTA PHARMACEUTICALS, INC. IN PROCESS

<TABLE>
<CAPTION>
     REF NO.        COUNTRY      SERIAL NO.                     MARK                    FILING DATE

<S>              <C>             <C>                          <C>                       <C>
                   Hong Kong                                  Vitrase

                  New Zealand                                 Vitrase

                     Taiwan                                   Vitrase

                     France                                   Vitrase

                    Germany                                   Vitrase

                     Italy                                    Vitrase

                     Spain                                    Vitrase

                 United Kingdom                               Vitrase

                     Norway                                   Vitrase

                  Switzerland                                 Vitrase

                  South Africa                                Vitrase
</TABLE>

                                       2

<PAGE>   31

                                  APPENDIX 1.16

                  ISSUED PATENTS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
     REF NO.        COUNTRY      PATENT NO.                    TITLE                     ISSUE DATE
     -------        -------      ----------                    -----                     ----------
<S>                 <C>          <C>            <C>                                      <C>
ASCINC.016A           USA        5,866,120      Method for Accelerating Clearance of     02/02/1999
                                                Hemorrhagic Blood from the Vitreous
                                                Humor with Hyaluronidase
</TABLE>

            PENDING PATENT APPLICATIONS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
     REF NO.        COUNTRY       SERIAL NO.                     TITLE                  FILING DATE
     -------        -------       ----------                     -----                  -----------
<S>                <C>            <C>           <C>                                     <C>
ASCINC.016C1          USA         09/139282     [*]                                      08/24/1998

ASCINC.016C2          USA         09/453012     [*]                                      12/02/1999

ASCINC.016CPC1        USA         09/444003     [*]                                      11/19/1999

ASCINC.036PR          USA         60/135403     [*]                                      05/21/1999

ASCINC.016QAU      Australia       76936/98     [*]                                      05/22/1998

ASCINC.016QBR       Brazil                      [*]                                      05/22/1998

ASCINC.016QCA       Canada         2288622      [*]                                      05/22/1998

ASCINC.016QCN        China        98805342.X    [*]                                      05/22/1998

ASCINC.016QEP         EPO         98924866.1    [*]                                      05/22/1998

ASCINC.016QKR        Korea      1019997010750   [*]                                      05/22/1998
</TABLE>

*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

<PAGE>   32

<TABLE>

<S>                <C>            <C>           <C>                                     <C>

ASCINC.016QMX       Mexico         991O495      [*]                                     05/22/1998

</TABLE>

            PENDING PATENT APPLICATIONS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
     REF NO.        COUNTRY      SERIAL NO.                    TITLE                    FILING DATE
     -------        -------      ----------                    -----                    -----------
<S>                <C>          <C>             <C>                                     <C>
ASCINC.016QRU        Russia       99126509      [*]                                      05/22/1998

ASCINC.016VAU      Australia      14070/97      [*]                                      11/20/1996

ASCINC.016VBR        Brazil     P19611617-0     [*]                                      11/20/1996

ASCINC.016VCA        Canada       2238360       [*]                                      11/20/1996

ASCINC.016VCN        China       96199746.K     [*]                                      11/20/1996

ASCINC.016VEP         EPO        96944203.7     [*]                                      11/20/1996

ASCINC.016VHK      Hong Kong     99103449.8     [*]

ASCINC.016 VKR       Korea      703840/1998     [*]                                      11/20/1996

ASCINC.016VNX        Mexico        984051       [*]                                      11/20/1996

ASCINC.016VRU        Russia       98111937      [*]                                      11/20/1996
</TABLE>
*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

                                       2

<PAGE>   33

                                  APPENDIX 1.27

             PROOF OF CONCEPT FOR PROLIFERATIVE DIABETIC RETINOPATHY

Proof of Concept for Proliferative Diabetic Retinopathy shall be deemed to be
achieved upon publication of "Clinical Study" results (as defined below) which
meet all of the criteria set forth below in one of the following journals;
American Journal of Ophthalmology, Archives of Ophthalmology or Ophthalmology.

"Clinical Study" requirements shall include the following:

    a.  Study design: prospective, randomized, masked, Vitrase treated versus
        control. Sample size and analysis plan will be established prior to the
        start of the trial. The statistical analysis plan should be finalized
        prior to the data base lock and will be based on intent to treat (ITT)
        analysis with last observation carried forward. The final study design
        will be provided to the Joint Operating Committee for their
        recommendations before the study begins.

    b.  Study population: [*]

    c.  Study size: A minimum of [*] subjects (Vitrase Treated).

    d.  Study location(s): United States and such other countries outside the
        United States where the standard of care is similar to the United
        States.

   [*]

*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00012-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00012-of-00352.parquet"}]]